‘(c) subsection (2) may operate to prevent subsection (1) applying by virtue of paragraph (b), unless subsection (2AB) applies.
‘(2AB) This subsection applies if company A’s ceasing to be a member of the first group at the same time as one or more associated companies forms part of arrangements the main purpose, or one of the main purposes, of which is the avoidance of a liability to corporation tax.’
Briefly, the amendment improves the targeting of the anti-avoidance measure introduced by clause 31. It does so by ensuring that the new rule has no adverse impact on commercial transactions that do not have a main purpose of avoiding corporation tax.
The amendment responds to comments on the clause from a number of accountants and from the Law Society, for which we are grateful. I urge the Committee to accept the amendment.
I have a question on clause 31 as a whole. The clause amends an aspect of de-grouping charge rules in the corporation tax regime for chargeable gains. I want to raise the issue of intangible assets, which are not included in the clause. I am interested as to why they have not been included. For example, if I bought a hotel, I might also buy the goodwill for that hotel. If I sell the hotel, the intangible asset will still attract a tax charge if the goodwill was bought after April 2002. There seems to be an inconsistency between the pre and post-2002 intangible arrangements. There seems to be no sensible reason not to revise the intangible asset rules to harmonise the treatment of tangible and intangibles in this matter. I welcome the Minister’s comments now, or, if not now, I would welcome some reflection post-Committee.
Clause 31 ensures that companies cannot avoid corporation tax on chargeable gains by using complex arrangements that seek to exploit a perceived loophole in the de-grouping charge rules. A de-grouping charge ensures that tax is paid on gains when, instead of selling an asset directly, a group of companies sells a company that owns an asset. Otherwise, there could be a loss of tax, whether as a result of normal commercial arrangements or through tax avoidance.
The right hon. Member for Delyn asked me about intangible assets. I understand that that is not relevant to clause 31. When we consider clause 45 in due course, intangible assets will be relevant in that context. However, that is not the case in the context of a company ceasing to be a member of a group and the conditions under clause 31.