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Mr. Burnett: I was extremely interested in the matters raised by the hon. Member for Arundel and South Downs (Mr. Flight). He stressed the importance of consultation and of ensuring that the provisions are correct. They are designed to address loopholes in the Bill; we held lengthy discussions on those matters in Committee. In particular, they cover roll-overs and multiple roll-overs--an extremely complex issue. The fact that the amendments were available only yesterday means that neither individuals in the professions nor taxpayers have had an adequate opportunity to give their views on the drafting.
I do not expect the Minister to offer us this afternoon a redrafting or suggested redrafting of amendments that the Government tabled only yesterday. I hope, however, that before the Bill goes to the House of Lords, he will authorise his officials to submit it to the professions, to taxpayers and interested individuals so that they can consider it and offer their comments. I am sure that the Minister will then be minded to listen carefully to their views.
In Committee, I asked the Minister what the Government's aim was in respect of these provisions. I asked him to confirm that, if there was a bona fide exchange of shares--for example, on a takeover--at approximate parity, and provided it that was not part of a measure designed for the avoidance of taxation, a charge should not arise for the taxpayer. There should be no charge to a taxpayer on a takeover or subsequent takeover; to use capital gains tax jargon as roll-over jargon, it should be treated as "no gain, no loss". There should be no charge for the special national insurance contribution.
Since the Minister was not prepared to accept the amendments that we tabled previously, I can only ask him to elucidate--to tell the House exactly what the charge will be. When will there be an exemption on a roll-over or a multiple roll-over? Will the Minister confirm that he will instruct his officials to circulate these draft provisions to the professions and to interested parties? And when they make their comments and submissions, will he listen to them and then submit a properly drafted Bill to the House of Lords?
Mr. Jack: I do not profess to understand the technicalities of this provision beyond its general purpose, but I rise to express my discontent at Government amendment No. 3 and the tortuous drafting therein. Except for the sake of giving the Financial Secretary adequate time to respond to the excellent speech made by my hon. Friend the Member for Arundel and South Downs (Mr. Flight), I shall not detain the House for long.
Mr. Jack: It is a great pity that the Whip on duty will not grace the House with his own clairvoyance on the matter. The fact that we are subjected to such language is a condemnation of parliamentary drafting, especially as a tax law rewrite exercise is taking place.
Secondly, I should like the Financial Secretary to tell us why such a technical matter was not subject to further consultation. The Government have had long enough to develop the Bill. Part of the clarity of the tax system has been achieved by virtue of subjecting to outside opinion the proposals in the rewrite exercise. As both Front-Bench spokesmen have said, this group of amendments clearly has not been subject to the white heat of public scrutiny.
I ask the Financial Secretary for a proper, fully detailed explanation of Government amendment No. 3. Why has it been so poorly drafted? How does he propose to ensure that practitioners have an opportunity to comment on the legislation before it is finally cast in concrete?
Mr. Timms: I am grateful to the hon. Member for Arundel and South Downs (Mr. Flight) for the care with which he has studied these amendments and taken advice on their contents. He and the hon. Member for Torridge
Under clause 3, settled options will not incur any further class 1 liability where the option is subsequently rolled over, provided that roll-over is conducted at parity. That aspiration was expressed by both hon. Gentlemen, and that is our intention. Where the roll-over is not at parity, class 1 national insurance contributions will apply, but only on the proportion of the gain on the new option that relates to the amount in excess of parity. So the amount of the gain on the new option that relates to the original remains capped.
Mr. Timms: Let me finish the point. I confident that, when these amendments are agreed to, that is what the clause will achieve. The relief from class 1 contributions will be provided by a new basis of the class 1 charge. Therefore, only the proportion of the new option in excess of parity will be subject to charge. That is the intention.
Of course, I shall consider with great care what hon. Members have said about the details of the wording. The right hon. Member for Fylde (Mr. Jack) asks what Government amendment No. 3 will achieve. The best that I can do is to refer him to the published notes, which set out precisely what Government amendments Nos. 3 and 4 will achieve. I shall carefully consider the points that hon. Members have made. I am happy to discuss technical matters, as we have done throughout the process, with the share scheme lawyers group. The Inland Revenue has discussed the roll-over provisions with that group. I believe that these amendments will achieve the Government's intention, which is supported on both sides of the House, and on that basis, I commend them to the House.
Amendments made: No. 2, in page 4, line 44, at end insert--
'(3A) The liability by virtue of section 2(3) to pay Class 1 contributions in respect of a gain realised on the assignment or release of the original right shall be determined--
(a) as if (notwithstanding anything in section 136(1) of the Income and Corporation Taxes Act 1988) the replacement right were or, as the case may be, were part of the valuable consideration given for the assignment or release; and
(b) as if the value of so much of that consideration as is represented by the replacement right were equal to whichever is the smaller of the following amounts--
(i) the amount which (in accordance with the provisions of section 135(3)(a) of that Act) would have been taken to be the gain realised by an exercise in full of the original right immediately before the time of its assignment or release; and
(ii) the amount which (in accordance with those provisions) would have been taken to be the amount of the gain realised by an exercise in full of the replacement right at that time (assuming it to be exercisable at that time) which falls immediately after it is given in consideration of the assignment or release.'.
8 Feb 2001 : Column 1117 (b) the amount which would have been taken (in accordance with those provisions) to be the gain realised by a full exercise of the old right immediately before the time of its assignment or release;
In Committee, I was happy to accept the amendments, tabled by the hon. Member for Arundel and South Downs (Mr. Flight), which extended the period in which notification and payment must be made from 60 to 92 days after Royal Assent. Of course, that change must be made throughout the Bill, but we subsequently found an omission. The amendment will remedy that omission and ensures that 92 days will be referred to throughout.