Corporation tax: territorial scope etc

Part of Finance Bill – in a Public Bill Committee at 4:00 pm on 7th July 2016.

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Photo of David Gauke David Gauke The Financial Secretary to the Treasury 4:00 pm, 7th July 2016

I will of course address the questions that the hon. Lady has raised, but it might be helpful if I first provide a bit of background. Stamp duty is usually payable at 0.5% on instruments that transfer shares—no, I do not want to give that background. [Interruption.]

Yes, let us turn to this new clause. To give a bit of background, it is worth pointing out that this measure has two key principles. First, UK land is a national resource and profits from dealing in or developing land should be fully taxed in the UK. This is an internationally accepted principle. However, some companies based offshore have organised their operations to reduce their UK tax on these profits. The new specific charge on these profits will put an end to such arrangements.

Secondly, this measure is about fairness. It will level the playing field between UK and offshore developers by preventing arrangements that are designed to avoid UK tax. This will ensure that UK and overseas businesses are put on the same tax footing when carrying out the same activities. This measure was announced at Budget 2016 alongside an anti-avoidance rule that had immediate effect. HMRC has also created a taskforce to ensure that tax on these profits is effectively collected by identifying and investigating offshore businesses that try to avoid paying tax.

This measure is targeted at those who have a property building trade; it does not impact the tax profile for investors in UK property. On the timing, I understand why the hon. Member for Salford and Eccles raised the fact that we have done this through new clauses. It is important that we get this legislation right. In these particular circumstances, it was not possible to bring the legislation forward at the time the Finance Bill was published. None the less, I think these new clauses deliver what the Government are seeking to do. I therefore hope that they will stand part of the Bill.

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