Clause 49 - Meaning of “investment trust”

Finance (No. 3) Bill – in a Public Bill Committee at 12:00 pm on 7th June 2011.

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Question proposed, That the clause stand part of the Bill.

Photo of David Hanson David Hanson Shadow Minister (Treasury)

I will not detain the Committee for long. I want to ask the Minister a couple of questions about process, rather than content. It is a moveable feast, and I am on my own today. The Minister will know that the clause allows the Treasury to make regulations about the circumstances in which the commissioners for Her  Majesty’s Revenue and Customs may approve applications from a company to be an investment trust. At line 11 on page 30, the clause states:

“A statutory instrument containing the first regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.”

On page 31, clause 50 states that draft regulations must be

“laid before and approved by a resolution of the House of Commons.”

Are those to be negative or positive resolutions, and how will they be brought forward? Proposed new chapter 3A of part 13 of the Corporation Tax Act 2010 states that

“The Treasury may by regulations provide” that a transaction be specified. I am interested in the practicalities of that, to clarify how the Treasury intends to bring forward such regulations. I have no particular concerns about the proposals in clause 49, but I seek clarity on the resolution procedure and—if he knows the answer—on when the Minister expects such regulations to be brought forward after Royal Assent.

Photo of Mark Hoban Mark Hoban The Financial Secretary to the Treasury

I am grateful to the right hon. Gentleman for raising those questions. Let me first say a little about clause 49. It makes changes to introduce a new tax framework for investment trusts, including the removal of rules that have imposed unnecessary restrictions on the commercial activities of investment trusts in the UK. The changes introduce a new, modernised framework that provides increased certainty for investors and reduced costs to businesses. It is worth bearing it in mind that the rules have remained unchanged since 1965, so they are perhaps overdue for reform and modernisation given the change in the investment landscape over the past 46 years. The changes have been greeted with support from the investment trust community, which welcomes the proposals that we have set out.

In respect of the questions that the right hon. Member for Delyn has asked, the first exercise of the powers in both clauses 49 and 50 will be subject to the affirmative procedure, so there will be a debate in Committee. Subsequent uses of those powers will be dealt with through the negative procedure, under which hon. Members will be required to pray against those motions to enable a debate to take place. I assure the right hon. Gentleman that the first use of the powers will be subject to the affirmative procedure, so there will be the opportunity for proper parliamentary scrutiny as a matter of course.

The changes will be brought forward in the autumn of this year. I hope that, with the Committee’s support, clause 49 will stand part of the Bill.

Question put and agreed to.

Clause 49 accordingly ordered to stand part of the Bill.