That is correct. The exclusion for limited liability partnerships is set out in the guidance notes: they are not companies as defined by the Companies Act. My former employer, PricewaterhouseCoopers, would be excluded, as would my hon. Friend the Member for Henley, who was a partner. My hon. Friend the Member for South-West Hertfordshire has worked for a firm of solicitorsanother partnership. If it met the criteria, it too would be excluded. A wide range of significant businesses will be excluded as a result of the carve-out for partnerships.
There are sensible reasons why partnerships should be carved outfor example, the provision would impose upon the limited partner in a private equity firm an obligation that probably could not be carried out. However, the provision goes some distance beyond that by excluding retail or professional partnerships. It would help if the Minister were to clarify why these businesses should not be included, and why they are carved out. Does she believe that they are inherently low risk? If so, why are other low-risk businesses not carved out?
We need some explanation for the inconsistencies on which businesses are carved out. I go back to my earlier point that part of the problem is that the Government did not think the matter through. The provision was included in the Bill at a late stage, perhaps on a whim. I do not know what whim it was meant to satisfy; perhaps someone felt good trying to tackle some of the tax measures that companies take, without thinking through the process or of what the outcome would be. We need some explanation of why partnerships and mutuals are excluded.
The Minister also sought to deal with the question of foreign companies. Branches of foreign companies are excluded from the provision. I know that Deutsche bank in the UK is established as a branch and that many European financial services businesses are based here under a branch structure. The Economic Secretary and I have discussed before the question of passporting, which enables companies incorporated in other European economic area member states to operate through a branch structure in the UK.
The Minister spoke of ensuring that the balance sheet totalled more than £2 billion, to ensure that the banks were picked up. I suspect that the balance sheet of the UK branch of Deutsche bank would meet the criteria. I suspect that it is quite a big taxpayer, if only through the tax paid on staff salaries, bonuses and so on, the VAT paid on purchases and the stamp duties paid on share transactions, but it has been excluded. The Government need to state more clearly the nature of the exclusions. A group with its headquarters in the UK has to sign off tax returns and give the declaration required under schedule 46, but I am not sure how it would be able satisfy itself about the operation of overseas subsidiaries. We shall come to later to how the materiality exemption in the later amendments could help those companies, but it is clear from the guidance notes that the materiality level to which the Government refer is not the materiality that is used in sets of statutory accounts; it is a different, unspecified level of materiality.
What expectations do the Government have of people in UK-headquartered groups being able to sign off the way in which tax is dealt with in their overseas subsidiaries? A company in the UK that is part of an international group may fall within the regime and be required to understand the tax accounting elsewhere in the group. The senior accounting officer would have to attest to the sufficiency of not only the UK companys accounting arrangements, but those of the worldwide group, and he may have little practical or technical knowledge of that.
Some significant concerns arise from the tighter definition in the group of amendments. To put the matter beyond doubt, I am not arguing that the measure should be extended to cover branches, partnership or mutuals. I am trying to understand why they are excluded, because that will give some insight into the Governments thinking on the purposes of the measures. We debated the matter in Committee of the whole House and there are more issues to be teased out in this Committee. Depending on the Ministers response, we may return to it on Report.