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Mr. Gibb: I will accede to the Minister's request that I ask the leave of the House to withdraw amendment No. 2 and refrain from pressing amendments Nos. 3 and 11, but he was slightly disingenuous when he knew very well the purpose of the amendments. It was not intended to restrict the use of prison in dealing with people who commit serious company law or insolvency law offences. The purpose of the amendments is to point out the very real concerns, raised by the House of Lords Select Committee on Delegated Powers, that it is not proper--it is not right--for new serious criminal offences punishable by prison to be introduced into our legal system by means of secondary legislation.
The salient question is not whether the affirmative or negative resolution procedure is used, but whether the new crimes are created by secondary legislation, which cannot be right. Such a measure should go through the full procedures of the House--First Reading, Second Reading, Committee stage, Report stage and Third Reading--and then pass on into the Lords, so that there is a full chance of the whole nation being aware of the creation of those new criminal offences.
The provisions are very wrong. It is a sad day when our House is rubber-stamping and mass-producing this kind of criminal legislation through secondary legislation. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule
Names and registered offices
Amendment made: No. 6, in page 15, line 15, leave out--
'incorporated as a limited liability partnership with that name,'
'a limited liability partnership or oversea limited liability partnership,'.--[Mr. Stuart Bell.]
6.55 pm
Dr. Howells: I beg to move, That the Bill be now read the Third time.
The Bill will introduce, for the first time in nearly a century, a new vehicle for carrying on a business. It is the result of three years of consultation and debate with a wide variety of interested and learned individuals. Detailed legislative proposals have been in the public domain since September 1998, and these were scrutinised shortly afterwards by our own Select Committee on Trade and Industry. Since then, the Bill has received close and thorough scrutiny in the other place and by Members of this House.
The Bill before you today, Mr. Deputy Speaker, is in very good shape, and I take the opportunity to thank all those, on both sides of the House, who participated in the many lively and interesting debates that we have had on the detail to ensure that this is the case.
6.56 pm
Mr. Gibb: We have now reached the final stage of the Bill's long journey to the statute book. It is one of the few Bills that the Government have managed to get through both Houses without its becoming logjammed in the congestion that they have created in the other place, so this is quite a novel occasion.
The Bill started life under the Conservative Government, in response to some genuine concerns on the part of the accountancy and legal professions, which were finding it increasingly difficult to retain some of their best people because those people were refusing to accept the risks of becoming a partner.
Listening to some of the members of the Labour party and their deep-rooted prejudices and hostility to accountants has been quite a revelation. There are 114,000 chartered accountants in this country, who work hard for a living, like anyone else. Some are paid well; others are not. But why should that particular line of work expose participants to the risk of losing a lifetime's savings as a result of the negligence of a fellow partner? That approach does not apply to doctors or nurses in the national health service--no one could say that the work of a chartered accountant is more important than that of a doctor or a nurse--or to teachers, or even to bankers in the City of London, so why should it apply to accountants and solicitors?
The Bill simply addresses that historical anomaly and, if anything, it is likely to ease the upward pressure on salaries as firms of solicitors and accountants find it easier to recruit and to retain key staff.
Mr. Fabricant: Is it not also the case that people using those services will also find that their fees are reduced, as was pointed out earlier in our debates this evening, because there will be less need for firms to take out indemnity insurance, which can be so costly nowadays?
Mr. Gibb: My hon. Friend makes a very valid point, and I hope that the hon. Members for Great Grimsby (Mr. Mitchell) and for Newcastle upon Tyne, Central (Mr. Cousins), who tabled several amendments, will take it on board.
The Bill was one of the first to undergo the new procedure of being examined by a Select Committee before beginning its passage through Parliament. The Select Committee report was of a very high quality and certainly resulted in the removal from the Bill of a raft of the more unacceptable and unworkable provisions. However, it is disappointing that the Committee has not been given the opportunity to examine in more detail the whole volume of draft regulations which were re-published in almost final form in May 2000. Given that the meat of the Bill is contained in those regulations, I believe that the experiment of having a Bill scrutinised by a Select Committee has not been completed, given that it has not yet looked at those regulations. The Committee requested to look at those regulations. I hope that before
those regulations are laid before Parliament, a report will be prepared on the volume of draft regulations that the Government have published.The new draft Bill that followed the Select Committee report went through a further consultation process. However, the final Bill, which started life in another place, gave rise to a number of concerns. My noble Friend Baroness Buscombe highlighted on Second Reading our concern over the disapplication of partnership law and the absence of a default to that law on issues on which the partnership agreement is silent. The Government have dealt with that matter in part, although not satisfactorily.
The Government took on board and dealt satisfactorily with our concern about the absence of provisions to deal with a member wishing to retire from a limited liability partnership. We were also concerned about an ambiguity in the Bill: whether members of an LLP could be construed as employees. That would have significant tax and employment law consequences for that member. Again, Lord McIntosh took on board Opposition concerns and amended the Bill to make it clear that members of an LLP were not to be employees.
We were concerned about the taxation provisions in the Bill and whether converting from a partnership to an LLP would trigger a capital gains and a stamp duty charge. We secured assurances and amendments on that matter in another place. Other issues, such as insolvency and acquisition accounting were also raised and dealt with. Indeed, if Ministers were as responsive to Opposition concerns in this House as they seem to have been, on occasion, in another place, they might not now be developing a reputation for being out of touch and arrogant.
Having said that, the Opposition are pleased that we have ensured that this legislation, which is important for commerce, will go on to the statute book in a better form than it would otherwise have done. We remain concerned about the absence of a general default clause and alarmed at the extensive regulatory powers contained in the Bill, in particular clause 16--the Henry VIII clause--and the power to create new serious crimes and punishments by secondary legislation, which is contained in clause 17.
Those important reservations aside, the Bill is welcome. As my hon. Friend the Member for Lichfield (Mr. Fabricant) just intimated, it will do much to ease concerns among professional firms and we can only hope that that may lead to industry facing smaller increases, or even reductions, in professional fees.
7.2 pm
Mr. Burnett: We support the Bill, although some other improvements should have been made. I am encouraged by what the Minister said about its applicability to solicitors.
We discussed clause 7 at length in Committee-- the provisions that relate to ex-members. The Minister criticised that clause in Committee, at least by implication, because he considered it inflexible. On report, I tabled amendment No. 5, but it was not selected. I hope that the Minister will think again about that matter. The amendment would have made it clear that clause 7(2) was intended to have a similar effect to section 31 of the Partnership Act 1890, which the Minister conceded was
important and prayed in aid for flexibility. Such an amendment would preserve flexibility with regard to the arrangements for the internal management of a limited liability partnership, which is important.There are to be further consultations and regulations in respect of taxation. I draw the Minister's attention to the roll-over relief provisions that impact unsatisfactorily on LLPs. Roll-over relief has been an aspect of capital gains tax since the inception of that tax in 1965, I believe. At present, gains on the sale of an asset used in a trade can be rolled over into partnership property--that is, an existing 1890 Act partnership. There are special rules if the property is a wasting asset. Where that roll-over has taken place, the gain is not recaptured if that 1890 partnership comes to an end, provided that the assets are not disposed of. One pays the tax, including the tax on the rolled-over gain, when the asset is sold. If one partner leaves and sells his interest, the gain crystallises at that point and only in relation to that proportion of the asset that is sold. If an 1890 partnership ceases trading and the asset is owned in the same proportions as it was owned in the partnership when it was functioning, the rolled-over gain does not crystallise--it does not do so until the asset is sold.
I hope that the Minister will confirm that that capital gains tax treatment should apply to LLPs as it does to existing partnerships. It is important because there will be no cash to pay the tax until the asset is sold and that will affect small businesses in particular. We talked about that in our debates on report. Small businesses do not have the benefit of high-powered and expensive lawyers and accountants to advise them--we must remember that any trade or profession can become an LLP. First, the small business will not have the cash to pay the capital gains tax. Secondly, small businesses require simplicity. If they cease trading as an LLP, they do not know that rolled-over gains will necessarily have to be payable in those circumstances.
Roll-over relief is important for small businesses--it is important for all businesses--and that is reflected in the fact that the relief for assets used in a trade which has not altered since the inception of capital gains tax in 1965. It is important because it encourages investment, which will encourage jobs. I hope that the Minister will think again about those two matters: clause 7 and the roll-over relief.
Finally, we support the Bill and we wish it a swift Royal Assent so that it can become the law of the land in short order. No body of individuals, no profession and no individual trade should be excluded or prejudiced because they cannot become an LLP at the same time as all the other organisations, trades or professions.
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