Clause 48 - Employer asset-backed contributions etc

Part of Finance Bill – in a Public Bill Committee at 3:00 pm on 14 June 2012.

Alert me about debates like this

Photo of Rachel Reeves Rachel Reeves Shadow Chief Secretary to the Treasury 3:00, 14 June 2012

Clause 48 brings into effect, as the Minister said, schedule 10, limiting the amounts on which tax relief will be given to an employer in respect of contributions paid under an asset-backed pension contribution, or an ABC. The intention of the measure is to ensure that the tax relief accurately reflects, but does not exceed, the total amount of payments made to the registered pension scheme. The codification of this area is to be welcomed.

The asset-backed pension contribution is a structure in which a company transfers non-cash assets to a separate entity to provide an income stream to the pension scheme. At the end of an agreed period, the asset may pass to the company if the scheme is in surplus, or to the pension scheme if the scheme is in deficit. This can help to increase the security against the scheme and makes commercial sense at different times. There has been some uncertainty about this area in the tax regime, given the variety of deals that are done and the range of commercial purposes and benefits that they represent. It is right that the amount of tax relief given to employers using ABC arrangements reflects accurately the total amount of payments that the employer makes to the pension scheme, directly or through the ABC measure.

I understand that schedule 10 makes amendments to the structured finance arrangement rules to include ABC schemes within their scope. Has the Minister given consideration to what the effect would be of applying a tax code to ABCs, rather than amending existing arrangements? How many ABCs are set up each year? Have the new tax arrangements had an effect on that since the draft legislation was released? Does the Minister expect the clause to affect the number set up in future years?