| Previous Section | Index | Home Page |
'(a) there is a time in that period or in the period of two years before the beginning of that period when'.
No. 58, in page 227, line 4, leave out
and insert
Government amendments Nos. 38, 59 and 40.
Mr. O'Brien:
This probing amendment is designed to clarify an issue regarding loan relationships. The changes in the Finance Bill to loan relationships will impact upon many companies throughout the country. In Committee there was considerable discussion about how great that impact would be. There were also a lot of amendments because of the need to clarify the Bill. It became clear that this was an enormously complex area of law, but the amendment focuses on one aspect that, in some ways, illustrates the overall problems that face businesses with loan relationships.
We were reassured in Committee that although this was a complex area of law, it would not cause enormous difficulties to smaller businesses because the complexities of the matter would impact mainly on larger corporations which have accountants and specialists able to deal with it. I hope that that is the case, but we have seen--as the amendment again illustrates--that there are areas of ambiguity that even a specialist might find difficult. The legislation seems to have been rushed and is often confused, and we will probably have to tidy it up in the years to come--at which time, no doubt, it will be a Labour Government who will have to do it.
Our proposal is specific. Clause 94 of the amended Bill deals, among other things, with perfectly ordinary trade debts that are interest-bearing. Such debts are within the loan relationships regime by virtue of that clause, in that the interest is brought into that regime. If the trade debts should turn out to be bad or doubtful, it appears--unfortunately--that no relief is available for the loss in respect of the debt itself. In contrast, relief is available in respect of the interest. It is at least arguable that clause 94(5) of the amended Bill will prevent the relief from being claimed as a trading deduction in the normal way for the bad debt.
The question whether the interaction of clauses 94 and 97 denies a trader any relief on bad trade debts was raised in Committee, and the Minister gave some explanation. To avoid ambiguity, however, it would be helpful if she would explain in further detail exactly what the Government are proposing, and that is why we tabled the amendment.
Mr. Tim Smith:
Will the hon. Gentleman confirm that it is now Labour party policy to introduce statutory interest on the debts of companies? If so, would that be subject to this legislation? Would that not be an additional complication for small businesses?
Mr. O'Brien:
The hon. Gentleman raises an interesting and important matter. I am not sure that it is directly applicable to the amendment, but as he has raised it--and as you have allowed the intervention, Mr. Deputy Speaker--I shall try to deal with it. We have received many representations from small businesses whose debts have not been paid, causing considerable cash flow problems. I am sure that the hon. Gentleman has such cases in his constituency, as I have in mine. When I go to visit small business men, I can almost guarantee that that issue will be raised, and I am sure that all hon. Members agree.
The various small business organisations have tried for a number of years to find ways of resolving the problem, and there are currently divisions of opinion within the
small business community as to how it can be dealt with. The Government have listened to some of the organisations, and the Opposition have often listened to the same ones. We have reached somewhat different conclusions about what is needed to deal with the problem, but we accept that it is enormously important.
Labour is consulting on charging interest in relation to debts above a certain threshold, particularly in so far as it benefits small businesses. That is certainly something that has been requested in a much broader way by a number of small business organisations. I am not sure that we can meet all their requests. As I said, there have been conflicts even within the small business community about how to deal with the matter. It is certainly important that we tackle the issue, which is what we are trying to do, initially through consultation. We are flagging up some ideas and we hope to get a positive consensus from the business community so that we can resolve and deal with the issues. In due course, the Conservative party may well come on board on those ideas. It is important that, as far as possible, there is that consensus.
I am conscious of the fact that one small business person's bad debt is another's extension of credit. So, when dealing with such issues, one has to be careful that in benefiting one small business one does not damage the other. That is why we are conscious that there must be a threshold--perhaps the size of the business or the debt--at which we would consider charging statutory interest.It has to be done with care and with the degree of consultation necessary.
We are starting that process now. The Labour Front-Bench team has flagged up the issue and I know that the Government Front-Bench team has also been consulting small business. As far as possible, it is important that we take it out of the argy-bargy of political debate. If we can get that sort of consensus within the business community, it will be all the better for all of us.
I am conscious, however, that other hon. Members will want to speak on amendment No. 68 and that they have various other proposals that they want to deal with during this short debate. Our amendment makes it clear that clauses 74 and 94 would deny relief for bad trade debts. Perhaps the Minister can clarify the position and provide the reassurances that we seek. If so, we might be able to end the ambiguity and doubt, which does need clearing up, and we might not need to press the amendment, which is why I flagged that up.
The Government's adherence to the Child Support Agency syndrome illustrates the problem that has faced us throughout the debate on loan relationships. The Government get a good idea--as I said in Committee, the concept of loan relationships is enormously important and there is a broad consensus of support on both sides of the House--but, as we have found so often, with self-assessment, for example, and with yesterday's amendment on taxes for transport and so forth, they fail to consult properly and rush it into legislation, thereby undermining the chances of it succeeding as well as it could.
After we finished the Committee stage of the Bill,I received a letter from the Chartered Institute of Taxation, which continues to have certain doubts about the way in which we dealt with loan relationships. We all accept that the Government and the Minister, within the time
constraints that they allowed themselves, have tried to consult as much as possible. On behalf of the Opposition, I would certainly concede that.
The difficulty that the Minister and the Treasury faced was the short period that they gave themselves in which to consult. That is what has led to the difficulties and ambiguities tackled by amendment No. 68 and why we will return to the matter in years to come. That is unfortunate. I would rather that we had slightly more time to consult properly and deal with the issues. Then we might have avoided having to table late amendments to try to resolve ambiguities.
Mr. Barry Legg (Milton Keynes, South-West):
I join the hon. Member for Bristol, South (Ms Primarolo) in welcoming and supporting the Government's change of heart in respect of the seven amendments that I have tabled. In the debate to be found between columns 629 and 632 of the Official Report of the Committee,I highlighted the lack of symmetry under existing legislation on relief for interest and on deep discount securities.
My amendments relate to paragraphs 2 and 17 of schedule 8. They would cure any potential mismatches that would exist where interest is taxed as being receivable but the interest accrued by the borrower would not get relief. That is a most welcome step forward by the Government which will help many businesses with their tax affairs.
Hon. Members who were in Committee will remember that, in column 631, I related the problems that joint venture lenders sometimes have. I referred to a particular case that my hon. Friend the Economic Secretary was kind enough to say she would consider further.My amendments deal with mismatches but the House may well have to return to relief for joint venture lenders, especially as regards bad debt provisions.
The amendments relating to paragraph 17 provide that, where deep discount securities exist, relief for the discount is not deferred in the hands of the borrower when it is brought into account in the hands of the lender under corporate debt rules. They are a worthwhile tidying-up of the legislation.
'at that time, or at any time in those two years'
'there is a time in that period or in those two years when'.
| Next Section
| Index | Home Page |