Double taxation relief for a bank should always take account of the banks cost of funding. The clause does no more than ensure that that is the case. If the qualification was added, it would give tax avoiders an excuse for arguing that the legislation should not apply and, for as long as they carried on arguing the point, they would not be paying their tax. I therefore hope that the hon. Gentleman will withdraw the amendment.
The Government amendments avert a risk of an excessive reduction in tax credit. The clause requires a bank or a company associated with a bank to use the average costs that the bank would incur to fund a transaction, known as its notional funding costs, for the purposes of its DTR claim, rather than the funding costs actually used in its calculations, where the notional funding costs are significantly higher. Normally, banks fund all their transactions from a single undifferentiated pool of assets, but in very limited circumstances a company associated with a bank may fund a particular transaction with a loan taken out for that specific purpose and thus have legitimate direct funding costs.
The amendments ensure that all funding costs, whether direct or indirect, will be taken into account in the DTR calculation, so relief will not be restricted where companies associated with banks have incurred legitimate direct funding costs. I hope that the Committee will feel able to accept the Government amendments and the clause.