As the Minister said, the Clause introduces a new anti-avoidance provision aimed at arrangements involving non-derecognition liabilities. These are complex structures whereby a company transfers assets to another entity, but under accounting rules continues to recognise those assets and related liabilities on its own balance sheets. Such structures are of course common in securitisations, which are an important part of the UK’s financial landscape. In these arrangements an originating company passes on the economic risks and rewards with an asset, yet maintains the asset on its books. Used properly, these arrangements serve a legitimate commercial purpose. However, as the Minister said, there are examples of people bending or breaking the rules. Can he give the Committee a flavour of how prevalent he thinks that bending or breaking of the rules is?

The provisions of this clause seek to correct any rule-breaking by denying tax deductions where their main purpose is to seek to gain a tax advantage by exploiting non-derecognition accounting. The Opposition strongly support efforts to tackle avoidance and close loopholes that undermine trust in the tax system, and efforts to bring the tax gap down—as the last Government successfully did, and this Government are, I am sure, continuing to seek to do—but, as always, the details matter.

According to the “Budget 2025 Policy Costings” document—I commend it to the Committee if any member of the Committee has not read it—this measure is expected to raise around £20 million in 2025-26. That amount is expected to rise to £145 million by 2028-29 as it blocks schemes that seek to erode the UK tax base. However, the measure as drafted relies on a broad “main purpose” test—that is, I believe, a deliberately broad standard. It is important that that wording does not capture genuine commercial transactions that rely on similar accounting treatment, not least because the securitisation market is very significant: according to figures from the Association for Financial Markets in Europe, the value of outstanding securitisations in the UK was €224 billion at the end of Q3 2024.

The Opposition want to ensure that we maintain the competitiveness and the scale of that sector, so I will conclude with a few questions to the Minister. First, how will HMRC distinguish between the abusive non-derecognition schemes and bona fide securitisation deals that have valid commercial purposes? Secondly, what guidance will be published to provide clarity around the new main purpose test so that businesses have confidence and know which existing structures could be at risk? Finally, what assessment has the Treasury made of the impact of this measure on the UK’s ability to attract and retain securitisation business, compared with other jurisdictions?