Clause 33

Part of Finance Bill – in a Public Bill Committee at 2:15 pm on 17 May 2007.

Alert me about debates like this

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury 2:15, 17 May 2007

I cannot answer that because I was not in the House then, so I did not take part in that Committee. That issue is a concern, and I can certainly check Hansard to see whether or not we raised it. If we did not do so, we should have done.

We have frequently made the point that the Government’s anti-avoidance legislation has often been used as a sledgehammer to crack a nut—in some cases, the Chancellor takes a sledgehammer to miss a nut. We support their efforts to shut down these schemes, but feel that the clause would not have been necessary were it not for the changes to the legislation made in 2003.

Secondly, I briefly want to ask about the interaction between schedules 23 and 24 to the 2003 Act, which are crucial in how the anti-avoidance schemes work. Although, as I have said, I very much support the intention behind the 2003 Act, it is not a problem-free piece of legislation. My question is about the distinct difference between the two schedules’ treatment of share-based and cash-based remuneration.

Tax deductions under schedule 23, which covers share-based remuneration, are determined by the value at receipt at the hands of the employee. If an employer funds a trust to acquire shares to be awarded to employees at a later date and the shares have gone up in value by the time the deduction takes place, the deduction for the employer becomes larger, so the value during the deferment is given to the employer. If, on the other hand, the shares have gone down in value, the employer has made a bad bet and only a reduced deduction can be claimed when it is eventually due, when the employee receives the benefit.

Deductions under schedule 24, however, which broadly covers anything that is not share based or to do with pensions, are based on the value on contribution by the employer, so that when the employer finally gets the deduction at the appropriate time, when the benefit gets into the employee’s hands, they are denied any growth in value during the deferral period, even if the employee is taxed on the higher amount. Does the Chief Secretary agree that different approaches are being taken? If so, why does the law treat those different types of benefit differently? The lack of neutrality between those approaches disadvantages employers such as mutual societies that cannot forward shares to their employees. It would be useful to hear him explain why the deferred benefit is treated differently in those cases.