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5 pm

I now turn briefly to the Government amendments. Amendment No. 32 would make a minor change to the provision for debt contracts and options. The hon. Member for North Warwickshire wanted an explanation. Let me give him a brief explanation of the amendment, which results from a drafting error.

Without the amendment, payments relating to contracts constructed by reference to hypothetical loan relationships could not be taken into account under the rules for derivative transactions.

Amendments Nos. 38, 59 and 40 address another issue altogether--double tax relief. The basic rule has always been that double tax relief is given in proportion to the amount of foreign interest that accrues to the company concerned. The new rules for corporate debt do not change that principle, but a number of minor and consequential amendments have been needed, including a specific provision preserving the position of non-traders under the new rules.

The amendments would enable regulations to extend to trading companies the application of the provision granting double taxation relief to non-traders. Using regulation to do that will facilitate consultation with those affected in the financial markets, so that the different authorised accounting methods available can be taken into account. It will also enable any necessary safeguards against loss of tax to be built in. I hope that the hon. Gentleman finds those explanations satisfactory.

Mr. Mike O'Brien: The amendments appear to give the Treasury the power to make regulations to extend to general insurance the rules applying to life assurance companies. Amendment No. 59 can be criticised in that it does not state sufficiently precisely what the regulations will do. Can the Minister tell us precisely what powers to regulate are being taken and what the regulations are intended to do?

Mrs. Knight: The regulations are intended to ensure that double tax relief is available to financial traders.I cannot specify precisely how they will be formulated because we need to discuss the matter with the financial traders and those involved. There is a requirement to get it right. We intend to ensure that tax relief is available and to do so in the right way.

The hon. Gentleman asked about insurance. The reason that insurance is mentioned--and there is a special mention of insurance credits--is that insurance is one of

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those particular industries that always has a separate mention, as he will recall from the Bill. For non-insurance companies, all overseas interest on which relief for overseas tax might be due is either a trading credit or a non-trading credit. As so often happens, there are special twists for insurance companies.

Certain non-trading credits are not covered by the existing rules for such credits in section 807(A)(3) of the Income and Corporation Taxes Act 1988. The amendments make sure that such insurance credits may also be the subject of regulations. Again we want to discuss the matter with the industry to establish exactly what rules are required so that we can be sure of getting them right. I hope that I have given the hon. Gentleman the explanation he wanted.

Mr. Mike O'Brien: We have had an interesting and informative debate. I share many of the concerns so well expressed by Conservative Members, particularly the hon. Members for Gloucester (Mr. French) and for Fulham (Mr. Carrington) about--as the hon. Gentleman for Gloucester put it--the need not to draw anti-avoidance provisions so broadly that they interfere with legitimate business dealings. That is a good lesson for us all. It also builds on the important proposals for simplification made last year by the hon. Member for Beaconsfield(Mr. Smith).

Tax legislation should be as clear as possible, and concerns were rightly expressed about the lack of clarity and the difficulties that that can create. In many ways, today's debate has demonstrated the best side of the House of Commons in that we sought to clarify ambiguities and get the legislation right. I am pleased that the Minister has adopted a positive attitude to the concerns of Conservative Back Benchers and the Opposition.

I understand what the Minister said about amendment No. 68. By and large, I accept that there may be a problem in pursuing the amendment and at the end of my remarks I shall seek the leave of the House to withdraw it.

Government amendments Nos. 38, 59 and 40--particularly amendment No. 59--demonstrate the price of rushing through measures without proper and full consultation. As has already been flagged up in the debate, it is important that we get tax legislation right and that there is full consultation with the various groups concerned.

The amendments demonstrate the price to be paid if that full consultation period is not allowed. The Government must now insert into the Finance Bill the ability to make regulations, the detail of which they have not yet worked out so they need to consult further.I accept the Minister's promise that such consultation will take place. I also accept that there is no prospect of further delay in loan relationships legislation, so the best way of proceeding is probably to put into law a provision allowing the Government to make regulations after full consultation has taken place, so that we can clear up these matters.

Giving the Government powers to make regulations is not the best way to address these issues, but in the circumstances, it is perhaps understandable. That said,I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Clause 95

Financial instruments

Amendment made: No. 32, in page 67, line 41, at end insert 'or (6)'.--[Mrs. Angela Knight.]

Clause 156

Limits on relief for expenses

Amendment proposed: No. 33, in page 113, line 41, after '1996,' insert--
'(iia) any amount which in pursuance of a claim under paragraph 4(3) of that Schedule is carried back to that period and (in accordance with paragraph 4(5) of that Schedule) applied in reducing profits of the company for that period,'.--[Mrs. Angela Knight.]

Mr. Alistair Darling (Edinburgh, Central): I was wondering whether the Economic Secretary might say a little more. Rather than formally proposing the amendment, will she tell us why the Government have chosen that particular form of words. Are we now dealing with amendment No. 33?

The Financial Secretary to the Treasury (Mr. Michael Jack): I thought that we were still on the amendments grouped with amendment Nos. 68 and 32. We have not yet decided them.

Mr. Deputy Speaker: We are on amendment No. 33.

Mr. Darling: I can understand the Financial Secretary's confusion: sometimes procedure is a great mystery, even to those of us who have served on Finance Committees for many years. When I rose to my feet to remonstrate with the Economic Secretary, who attempted to get amendment No. 33 agreed to formally, I said that I thought it might be helpful if the Government set out what the amendment is meant to achieve. If the Financial Secretary, who has now found the relevant briefing note, could tell us what the amendment is designed to do, I should be profoundly grateful.

Mr. Jack: The amendment is a straightforward and simple addition to what was added subsequently to clause 156 in Committee. The subsequent legislation allowed insurance companies carry-back facilities in respect of loan relationships. This amendment inserts that into the taxation procedures of life insurance companies.

Mr. Darling: I am grateful to the Minister. I know that we had an agreement to allow some amendments to pass formally, but this one gave rise to a query on the part of those advising us. It is helpful when Ministers set out what amendments are meant to achieve.

I did not mean to embarrass the Financial Secretary.If I succeeded in doing so, I apologise.

Amendment agreed to.

Amendment made: No. 34, in page 114, line 27, after '(5)' insert

'Subject to paragraph 4(10A) to (10C) of Schedule 10 to the Finance Act 1996,'.--[Mr. Jack.]

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Clause 174

Business property relief

Amendment proposed: No. 60, in page 137, line 28, at end insert--
'( ) In section 107(4) (replacement of property with unquoted shares), for the words from the beginning to "such shares" there shall be substituted--
"(4) Without prejudice to subsection (1) above, where any shares falling within section 105(1)(bb) above which are".'.--[Mr. Jack.]

Mr. Mike O'Brien: I picked up the Government's press release on this matter. Paragraph 4 states:

"Due to a technical defect, the current proposals in the Bill would have had the effect of withdrawing the replacement facility now available to controlling holdings. This was not the intention. Under the amendments both the existing facilities will be made available to all unquoted holdings regardless of their size."

I do not want to be churlish, but our general complaint throughout proceedings on the Bill has concerned the facts that the Government have had to submit amendments at the last moment, and that there have been problems to do with technical drafting, with lack of consultation, and with various failures on the part of the Government's system to get the Bill right.

There seems to be too much rush in the Government's approach. This will probably be my last opportunity to raise that concern, but it is valid, and the Government must take account of it. If they have to introduce another Finance Bill,I hope that they will acknowledge the anxieties that we have expressed throughout consideration of the Bill--through loan relationships, self-assessment and various aspects of inheritance tax.

I accept that technical defects will always come to light once a Bill has been published. We would hope that they would be as few as possible. In this case, there have been far too many mistakes. It is clear that the Government are not properly using the time running up to the Budget to work out precisely what they are doing. It is incumbent on Ministers to assure the House, even though they may not accept all our criticisms, that they understand our concern when Bills are brought before the House and are then subjected to last-minute, multiple amendments.

The omission under consideration, corrected by an amendment designed to reinstate a relief that was inadvertently omitted from clause 174, is a good case in point. I hope that the Minister will assure us that what I have said will be remembered. I offer those remarks in a helpful spirit, not to make a party political point. I hope that the Minister will give us the assurance that things will be done a bit better next time.

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