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Mr. Burnett: The Paymaster General stated that married couples should be taxed fairly and that this state of affairs will not be changed or altered by the clause. I put it to the Committee that married couples should be able to alter their shareholdings and should be taxed in accordance with that alteration, and that nothing should be done to disturb that.
There are many reasons why married couples decide to change their shareholdings in close companies. If there is a new marriage and a company is formed, only one share might go to one spouse because the other spouse has put considerably more capital into the project. After a few years of healthy marriage, there will be greater equalisation of those capital assets. These are common-sense matters. Drawing the settlement provisions into these arrangements is absolute nonsense; it should not happen and it is a disgrace.
28 Apr 2004 : Column 900
Dawn Primarolo: Surely, the hon. Gentleman is not saying that in 1990—this is the fundamental point that the hon. Member for Arundel and South Downs, who referred to the debates at that time, also misunderstands—it was expected that we should tax people in a way that was contrary to their explicit declaration as to how income was actually earned, as opposed to the operation of the 50:50 arrangement. It is to a declaration from the taxpayer, which was never discussed then, that the clause seeks to respond, and only in the case of close companies.
Mr. Burnett: I have spent most of my life—or at least quite a lot of it before I came to this place—dealing with close companies and corporate taxation, and I believe that it should be clear to everyone in the Committee that people, and married couples in particular, should be free to alter their shareholdings, by declaration of trust or otherwise, and then to be taxed in accordance with that alteration. Undermining that principle flies in the face of tax practice for years. Why are transfers between spouses free from capital gains tax? Why are such transfers free from inheritance tax?
Dawn Primarolo: The point is what happens where couples are saying that they jointly own a company and then seek to be taxed in a different way, which is not the 50:50 arrangement.
Mr. Burnett: I have heard what the Paymaster General has said; she has made the same point once or twice. I believe that a declaration should be made at the end of the tax year that reflects the true ownership of the shares and the proportions in which they are owned.
Mr. Flight: May I repeat the complicated point that clause 86 is relevant only because of the reinterpretation of section 660A? It is quite clearly an option for people to choose to hold assets jointly and achieve 50:50 if they are taxed successfully under the reinterpretation of section 660A. Therefore, the business of giving the declaration is not the fundamental underlying point that needs to be debated.
Mr. Burnett: I think that all of us in the Chamber have understood that point.
The point that my party and I cannot accept relates to the fact that, if people alter their ownerships in close company shares, they should be taxed in accordance with that alteration. The anti-avoidance or settlement provisions should not bite on that principle, and people should be taxed fairly in accordance with such alterations. It is free, and it should be free—I thought that this was the philosophy even of the Labour party—for married couples to make changes in their equitable ownerships. Such changes should be free of capital gains tax and inheritance tax. Such couples should be taxed in accordance not with the previous situation, but with the alterations that they have made in those equitable ownerships and with the circumstances and ownerships that prevail at the time when they make their tax return.
28 Apr 2004 : Column 901
What is important is not to erode those principles, but to ensure that married couples can alter their equitable interests and shareholdings and be taxed accordingly.
Question put, That the clause stand part of the Bill:—
The Committee divided: Ayes 266, Noes 160.
AYES
Abbott, Ms Diane
Adams, Irene (Paisley N)
Ainger, Nick
Ainsworth, Bob (Cov'try NE)
Allen, Graham
Anderson, rh Donald (Swansea E)
Anderson, Janet (Rossendale & Darwen)
Armstrong, rh Ms Hilary
Austin, John
Bailey, Adrian
Barnes, Harry
Barron, rh Kevin
Bayley, Hugh
Beard, Nigel
Begg, Miss Anne
Benton, Joe (Bootle)
Best, Harold
Blair, rh Tony
Blears, Ms Hazel
Blizzard, Bob
Bradley, rh Keith (Withington)
Bradley, Peter (The Wrekin)
Brennan, Kevin
Brown, rh Nicholas (Newcastle E Wallsend)
Brown, Russell (Dumfries)
Browne, Desmond
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, Andy
Campbell, Alan (Tynemouth)
Campbell, Mrs Anne (C'bridge)
Campbell, Ronnie (Blyth V)
Casale, Roger
Caton, Martin
Challen, Colin
Chapman, Ben (Wirral S)
Chaytor, David
Clapham, Michael
Clark, Mrs Helen (Peterborough)
Clark, Paul (Gillingham)
Clarke, rh Tom (Coatbridge & Chryston)
Clarke, Tony (Northampton S)
Clelland, David
Clwyd, Ann (Cynon V)
Coaker, Vernon
Coffey, Ms Ann
Coleman, Iain
Corbyn, Jeremy
Corston, Jean
Cousins, Jim
Crausby, David
Cruddas, Jon
Cryer, John (Hornchurch)
Cummings, John
Cunningham, Jim (Coventry S)
Cunningham, Tony (Workington)
Davey, Valerie (Bristol W)
David, Wayne
Davidson, Ian
Davies, rh Denzil (Llanelli)
Davies, Geraint (Croydon C)
Dean, Mrs Janet
Denham, rh John
Dismore, Andrew
Dobbin, Jim (Heywood)
Donohoe, Brian H.
Doran, Frank
Dowd, Jim (Lewisham W)
Drew, David (Stroud)
Drown, Ms Julia
Dunwoody, Mrs Gwyneth
Eagle, Angela (Wallasey)
Edwards, Huw
Efford, Clive
Ellman, Mrs Louise
Farrelly, Paul
Field, rh Frank (Birkenhead)
Fisher, Mark
Fitzpatrick, Jim
Fitzsimons, Mrs Lorna
Foster, Michael (Worcester)
Francis, Dr. Hywel
Gapes, Mike (Ilford S)
Gerrard, Neil
Gibson, Dr. Ian
Godsiff, Roger
Griffiths, Nigel (Edinburgh S)
Griffiths, Win (Bridgend)
Grogan, John
Hall, Mike (Weaver Vale)
Hall, Patrick (Bedford)
Hanson, David
Harman, rh Ms Harriet
Havard, Dai (Merthyr Tydfil & Rhymney)
Healey, John
Henderson, Ivan (Harwich)
Hendrick, Mark
Heppell, John
Hesford, Stephen
Hewitt, rh Ms Patricia
Heyes, David
Hood, Jimmy (Clydesdale)
Hoon, rh Geoffrey
Hope, Phil (Corby)
Hopkins, Kelvin
Howarth, rh Alan (Newport E)
Howarth, George (Knowsley N & Sefton E)
Hughes, Kevin (Doncaster N)
Humble, Mrs Joan
Iddon, Dr. Brian
Illsley, Eric
Jackson, Glenda (Hampstead & Highgate)
Jamieson, David
Johnson, Alan (Hull W)
Jones, Helen (Warrington N)
Jones, Jon Owen (Cardiff C)
Jones, Kevan (N Durham)
Jones, Lynne (Selly Oak)
Jones, Martyn (Clwyd S)
Joyce, Eric (Falkirk W)
Kaufman, rh Gerald
Keeble, Ms Sally
Keen, Alan (Feltham)
Keen, Ann (Brentford)
Kelly, Ruth (Bolton W)
Kemp, Fraser
Khabra, Piara S.
King, Andy (Rugby)
Kumar, Dr. Ashok
Lawrence, Mrs Jackie
Laxton, Bob (Derby N)
Lazarowicz, Mark
Lepper, David
Levitt, Tom (High Peak)
Lewis, Terry (Worsley)
Liddell, rh Mrs Helen
Linton, Martin
Love, Andrew
Lucas, Ian (Wrexham)
Luke, Iain (Dundee E)
McAvoy, Thomas
McCabe, Stephen
McCartney, rh Ian
McDonagh, Siobhain
MacDonald, Calum
McDonnell, John
MacDougall, John
McFall, John
McGuire, Mrs Anne
McIsaac, Shona
McKechin, Ann
McKenna, Rosemary
Mackinlay, Andrew
Mactaggart, Fiona
McWalter, Tony
Mahmood, Khalid
Mahon, Mrs Alice
Mallaber, Judy
Mandelson, rh Peter
Mann, John (Bassetlaw)
Marsden, Gordon (Blackpool S)
Marshall, Jim (Leicester S)
Martlew, Eric
Merron, Gillian
Michael, rh Alun
Miller, Andrew
Moffatt, Laura
Mole, Chris
Moonie, Dr. Lewis
Moran, Margaret
Morgan, Julie
Mountford, Kali
Mudie, George
Mullin, Chris
Murphy, Jim (Eastwood)
Murphy, rh Paul (Torfaen)
Naysmith, Dr. Doug
Norris, Dan (Wansdyke)
O'Brien, Bill (Normanton)
O'Brien, Mike (N Warks)
Osborne, Sandra (Ayr)
Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Perham, Linda
Picking, Anne
Pickthall, Colin
Pike, Peter (Burnley)
Plaskitt, James
Pollard, Kerry
Pope, Greg (Hyndburn)
Pound, Stephen
Primarolo, rh Dawn
Prosser, Gwyn
Quinn, Lawrie
Rapson, Syd (Portsmouth N)
Raynsford, rh Nick
Reed, Andy (Loughborough)
Reid, rh Dr. John (Hamilton N & Bellshill)
Robertson, John (Glasgow Anniesland)
Robinson, Geoffrey (Coventry NW)
Roche, Mrs Barbara
Rooney, Terry
Ross, Ernie (Dundee W)
Roy, Frank (Motherwell)
Ruane, Chris
Ruddock, Joan
Russell, Ms Christine (City of Chester)
Ryan, Joan (Enfield N)
Salter, Martin
Sarwar, Mohammad
Savidge, Malcolm
Sawford, Phil
Sedgemore, Brian
Shaw, Jonathan
Sheerman, Barry
Sheridan, Jim
Short, rh Clare
Simpson, Alan (Nottingham S)
Singh, Marsha
Skinner, Dennis
Smith, rh Andrew (Oxford E)
Smith, Angela (Basildon)
Smith, Geraldine (Morecambe & Lunesdale)
Smith, Jacqui (Redditch)
Smith, Llew (Blaenau Gwent)
Soley, Clive
Southworth, Helen
Squire, Rachel
Starkey, Dr. Phyllis
Steinberg, Gerry
Stevenson, George
Stinchcombe, Paul
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Stringer, Graham
Stuart, Ms Gisela
Tami, Mark (Alyn)
Taylor, Dari (Stockton S)
Taylor, David (NW Leics)
Thomas, Gareth (Clwyd W)
Timms, Stephen
Todd, Mark (S Derbyshire)
Touhig, Don (Islwyn)
Trickett, Jon
Truswell, Paul
Twigg, Derek (Halton)
Twigg, Stephen (Enfield)
Tynan, Bill (Hamilton S)
Walley, Ms Joan
Wareing, Robert N.
Watson, Tom (W Bromwich E)
White, Brian
Whitehead, Dr. Alan
Williams, rh Alan (Swansea W)
Winnick, David
Winterton, Ms Rosie (Doncaster C)
Woodward, Shaun
Woolas, Phil
Worthington, Tony
Wright, Anthony D. (Gt Yarmouth)
Wright, David (Telford)
Wright, Tony (Cannock)
Wyatt, Derek
Tellers for the Ayes:
Ms Bridget Prentice and
Charlotte Atkins
NOES
Ainsworth, Peter (E Surrey)
Amess, David
Arbuthnot, rh James
Bacon, Richard
Baker, Norman
Baron, John (Billericay)
Barrett, John
Beggs, Roy (E Antrim)
Beith, rh A. J.
Bellingham, Henry
Bercow, John
Beresford, Sir Paul
Boswell, Tim
Bottomley, rh Virginia (SW Surrey)
Brady, Graham
Brake, Tom (Carshalton)
Brazier, Julian
Breed, Colin
Brooke, Mrs Annette L.
Browning, Mrs Angela
Burnett, John
Burns, Simon
Burnside, David
Cable, Dr. Vincent
Calton, Mrs Patsy
Campbell, Gregory (E Lond'y)
Carmichael, Alistair
Chidgey, David
Chope, Christopher
Clifton-Brown, Geoffrey
Cotter, Brian
Davey, Edward (Kingston)
Djanogly, Jonathan
Dodds, Nigel
Donaldson, Jeffrey M.
Doughty, Sue
Duncan, Alan (Rutland)
Duncan, Peter (Galloway)
Duncan Smith, rh Iain
Ewing, Annabelle
Fabricant, Michael
Fallon, Michael
Field, Mark (Cities of London & Westminster)
Flight, Howard
Flook, Adrian
Forth, rh Eric
Foster, Don (Bath)
Fox, Dr. Liam
Francois, Mark
George, Andrew (St. Ives)
Gibb, Nick (Bognor Regis)
Gidley, Sandra
Goodman, Paul
Grayling, Chris
Green, Matthew (Ludlow)
Greenway, John
Hague, rh William
Hammond, Philip
Harvey, Nick
Hawkins, Nick
Hayes, John (S Holland)
Hendry, Charles
Hermon, Lady
Hoban, Mark (Fareham)
Holmes, Paul
Horam, John (Orpington)
Hughes, Simon (Southwark N)
Hunter, Andrew
Jack, rh Michael
Jenkin, Bernard
Jones, Nigel (Cheltenham)
Keetch, Paul
Kennedy, rh Charles (Ross Skye & Inverness)
Key, Robert (Salisbury)
Kirkbride, Miss Julie
Knight, rh Greg (E Yorkshire)
Laing, Mrs Eleanor
Lamb, Norman
Lansley, Andrew
Laws, David (Yeovil)
Leigh, Edward
Lewis, Dr. Julian (New Forest E)
Liddell-Grainger, Ian
Lidington, David
Lilley, rh Peter
Llwyd, Elfyn
Luff, Peter (M-Worcs)
McIntosh, Miss Anne
McLoughlin, Patrick
Maples, John
Mawhinney, rh Sir Brian
May, Mrs Theresa
Mitchell, Andrew (Sutton Coldfield)
Moore, Michael
Moss, Malcolm
Murrison, Dr. Andrew
Norman, Archie
Oaten, Mark (Winchester)
O'Brien, Stephen (Eddisbury)
Öpik, Lembit
Osborne, George (Tatton)
Page, Richard
Paice, James
Paisley, Rev. Ian
Price, Adam (E Carmarthen & Dinefwr)
Prisk, Mark (Hertford)
Pugh, Dr. John
Randall, John
Redwood, rh John
Reid, Alan (Argyll & Bute)
Robathan, Andrew
Robertson, Angus (Moray)
Robertson, Hugh (Faversham & M-Kent)
Robertson, Laurence (Tewk'b'ry)
Robinson, Mrs Iris (Strangford)
Robinson, Peter (Belfast E)
Roe, Mrs Marion
Rosindell, Andrew
Ruffley, David
Russell, Bob (Colchester)
Salmond, Alex
Sanders, Adrian
Shepherd, Richard
Simmonds, Mark
Simpson, Keith (M-Norfolk)
Smith, Sir Robert (W Ab'd'ns & Kincardine)
Smyth, Rev. Martin (Belfast S)
Spelman, Mrs Caroline
Spicer, Sir Michael
Spink, Bob (Castle Point)
Spring, Richard
Steen, Anthony
Stunell, Andrew
Swayne, Desmond
Swire, Hugo (E Devon)
Taylor, John (Solihull)
Taylor, Matthew (Truro)
Taylor, Dr. Richard (Wyre F)
Thomas, Simon (Ceredigion)
Thurso, John
Tonge, Dr. Jenny
Trend, Michael
Trimble, rh David
Turner, Andrew (Isle of Wight)
Tyler, Paul (N Cornwall)
Tyrie, Andrew
Waterson, Nigel
Watkinson, Angela
Webb, Steve (Northavon)
Weir, Michael
Whittingdale, John
Wiggin, Bill
Williams, Hywel (Caernarfon)
Williams, Roger (Brecon)
Willis, Phil
Wilshire, David
Winterton, Ann (Congleton)
Wishart, Pete
Yeo, Tim (S Suffolk)
Younger-Ross, Richard
Tellers for the Noes:
Gregory Barker and
Mr. Peter Atkinson
Question accordingly agreed to.
28 Apr 2004 : Column 904
Clause 86 ordered to stand part of the Bill.
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