The clause describes the circumstances in which new businesses may be tempted to pursue avoidance arrangements, and essentially it warns them off doing so. It is a strange clause, and I have never seen one drafted in such terms before: is it a standard form? It simply states that anybody who is considering doing anything that may avoid compliance with the rules on these arrangements needs to beware. The clause lacks clarity, which makes me slightly anxious. The Bill does not specify whether a court or HMRC will be the judge of what is, or is not, an avoidance arrangement. Who will be the defining arbiter in such cases?
I am also concerned that a business could inadvertently fall foul of the clause and that its activities could be interpreted as avoidance if it picks up a trade where another company has left a patch of business behind. As my right hon. Friend the Member for Delyn described in an earlier debate, specific arrangements prevent one person from picking up a trade that has been left behind by a former partner. In circumstances around the edges, I worry about the inadvertent consequences for businesses.
The issue of businesses that are undertaken through a franchise arrangement is not properly described in the legislation or explanatory notes. A new start-up business may seem an easy concept to imagine, but many firms purchase a franchise as a way of starting up their entrepreneurial career. One need only look at websites advertising the sale of franchises to see the sort of business opportunities that are available to new start-ups. The other day, I googled retail and food franchises, and there were franchises for sale for Burger King, McDonald’s, Smoothie Fresh, Shakey’s and Perfect Pizza—should any hon. Members wish to start up a new business in that line of work. It occurred to me that there is a risk for a new start-up entrepreneur who may go down the franchise route and fall foul of circumstances in which the business could be described as an existing line of business and, therefore, it may not be classified as a new start-up. I would be grateful if the Minister could address the scenarios relating to franchises, because that issue has not yet been elaborated on in the explanatory notes or in the legislation.