Part of Finance (No. 2) Bill – in a Public Bill Committee at 11:15 am on 26 October 2010.
David Gauke
The Exchequer Secretary
11:15,
26 October 2010
As we have heard, Amendment 21 would alter the test limit of the allocation of losses that may be claimed or surrendered between a consortium company and a consortium member. It would extend the new test so that it included both indirectly and directly held voting power.
The Government are introducing the measure to counter avoidance. HMRC has been made aware of several schemes that have taken advantage of the rules as they stand. As with all anti-avoidance legislation, the Government are committed to ensuring that genuine commercial transactions are not affected. We have taken on board comments received during the consultation period over the summer to make sure of that.
The amendment, however, would loosen the legislation unnecessarily and weaken the avoidance rules. Including indirect voting power would mean that the voting power held by subsidiary companies could be attributed to a consortium member. While that would extend the percentage entitlement to losses in some limited situations, it would open the avoidance window that we are looking to close. Tax avoidance opportunities would continue, and I am sure that that is not the intention of Opposition Members, although I understand that this is a probing amendment.
If we were not to tighten this particular area, the cost would be likely to be somewhere in the region of £30 million a year. Amendment 21 would broaden the entitlement to losses for some consortium members in complicated situations, but it would also allow the continuation of the avoidance schemes that we wish to close. Extending the measure to indirect voting power would prevent the attribution of a subsidiary’s holding. A subsidiary can, if conditions are met, make its own claim and, in such situations, there is no disadvantage. We have made changes in response to consultation comments, but the change proposed in the amendment would weaken the legislation unnecessarily, so I ask the hon. Lady to withdraw it.
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