Clause 70

Part of Finance Bill – in a Public Bill Committee at 6:30 pm on 16 June 2009.

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Photo of Stephen Timms Stephen Timms Financial Secretary (HM Treasury) (also in the Department for Business, Innovation and Skills) 6:30, 16 June 2009

HMRC may well have an estimate, but I do not have it in front of me. If the matter is drawn to my attention, I will certainly let the hon. Gentleman know what it is. He is right about the sort of people about whom we are talking. The truth is that everyone knows what the rules are, and that tax should be paid, but it has become apparent that arrangements are entered into involving a front payment lease premium and a small rent to reduce tax. That arrangement is artificial, and I do not believe that closing the loophole will have a material impact on UK competitiveness.

I think I understood correctly that the hon. Member for South-West Hertfordshire asked about leases of different lengths. When a lease is less than 10 years with a break clause, the same rules apply. When it contains a relevant break clause that is not exercised, the new rules in the amendments will deem that, for the purposes of the legislation, a separate, notional lease had started immediately after the time at which the original lease would have ended had the break clause been exercised. The lease premium payment will be spread across the full terms of the original and notional leases, which would not have been the case under the Bill as drafted. Without the amendments, the total lease premium payment for the full original term of the lease would be spread across the shorter period to the date of the break clause whether or not it was exercised. That is unintended, and the amendments ensure that the new rules apply as intended.

The hon. Gentleman asked about the numbers affected. I cannot give the full number, but the costing was based on 47 cases of individuals employed by 19 companies using those arrangements.