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John Healey: We have had an extensive debate on the schedule, and the hon. Gentleman has made an extensive speech. I shall try not to retread old ground.

Either deliberately or unwittingly, the hon. Gentleman has conflated the application of existing transfer pricing rules with the extension of those rules to
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specific areas in the clause. The transfer pricing rules are established; they are essential; they are accepted; and they protect huge amounts of revenue to the public purse. They have been in existence for more than 50 years, and they have applied to partnerships for years. The Bill extends the rules to specified areas to which they do not currently apply. The changes apply only from 4 March 2005, which is when the changes were announced. The clause and the schedule do not apply retrospectively.

The hon. Gentleman talks about the venture capital industry being badged as an avoidance industry. Let me make it clear again that the Bill and the schedule are about the extension of transfer pricing rules. In fact, the letter that he quoted from the British Venture Capital Association makes it clear that its argument is about the application of existing transfer pricing rules.

There is a process for settling all disputes about the application or operation of tax rules. Her Majesty's Revenue and Customs applies and manages the operation of the tax system, and taxpayers have a right to contest the way that it does that. The legal system will settle matters of fact. There is a dispute about the enforcement of the existing rules, but it is not relevant to the Bill, which is about the extension, not the application, of transfer pricing rules. It is about their extension to syndicates in which companies are owned by more than one equity partnership, which means that they are, at the moment, able to get tax deductions beyond the rules. It is about heading off the fragmentation of ownership to get around those rules and dealing with what we now see as advice from professional advisers about how to do just that.

We are not in any way suggesting in the Bill that all private equity finance is somehow based on tax avoidance, but we are aware of professional advisers promoting opportunities for structuring ownership and financing of companies to get around existing rules. The purpose of the schedule and the clause that enables it is to protect likely future revenue loss. The hon. Gentleman therefore needs to understand that any suggestion that the cost to the private equity industry will be £1 billion or more is hugely wide of the mark. That could be the case only if the rules disallowed all the interest costs arising from private equity deals, and the rules will not do that. Companies will still be able to obtain tax deductions for interest on debt finance up to the arm's-length amount, and we have had a detailed discussion about that.

The hon. Gentleman mentioned the private finance initiative for the first time today. Let me make it clear that no changes are being made to the existing transfer pricing rules that apply to many PFI deals. We do not expect the changes to have any effect on PFI funding and there is no evidence of any impact on PFI deals since the changes were announced in March. The changes close loopholes to prevent companies from restructuring to get around the existing rules. They do not alter the way in which the existing rules apply to companies involved in PFI deals or other companies. The hon. Gentleman might like to know that HMRC has had discussions with PFI representatives, who I understand have been reassured. However, I am happy to hear of any further concerns that they may have.
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In summary, the purpose of the changes is to make the tax treatment of company finances fair for all companies, regardless of their ownership or financing structures. The changes introduced by the schedule will ensure that there is a coherent and consistent set of tax rules for companies with different ownership structures, including, albeit not exclusively, companies controlled by private equity investors. The new rules are in line with those of our major competitors, such as Germany and the USA. They will sustain the UK's position as an attractive location for international investment, and I commend the schedule to the Committee.

Question put, That the schedule be the Eighth schedule to the Bill:—

The Committee proceeded to a Division.

The Second Deputy Chairman: I ask the Serjeant at Arms to investigate the delay in the No Lobby.

The Committee having divided: Ayes 333, Noes 157.

Division No. 11
[9.56 pm


Ms Abbott
Nick Ainger
Mr. Bob Ainsworth
Danny Alexander
Mr. Allen
Mr. David Anderson
Janet Anderson
Hilary Armstrong
Charlotte Atkins
Mr. Ian Austin
Mr. Bailey
Vera Baird
Ed Balls
Gordon Banks
Ms Barlow
John Barrett
Mr. Barron
John Battle
Miss Begg
Sir Stuart Bell
Mr. Benton
Roger Berry
Mr. Betts
Liz Blackman
Dr. Blackman-Woods
Hazel Blears
Mr. Blizzard
Mr. Borrow
Lyn Brown
Mr. Nicholas Brown
Mr. Russell Brown
Mr. Des Browne
Mr. Jeremy Browne
Chris Bryant
Ms Buck
Richard Burden
Colin Burgon
Andy Burnham
Ms Butler
Mr. Byrne
Mr. Caborn
David Cairns
Mr. Alan Campbell
Sir Menzies Campbell
Mr. Ronnie Campbell
Mr. Caton
Mr. Cawsey
Colin Challen
Ben Chapman
Mr. Clapham
Ms Katy Clark
Paul Clark
Mr. Charles Clarke
Mr. Tom Clarke
Ann Clwyd
Ann Coffey
Harry Cohen
Michael Connarty
Rosie Cooper
Jeremy Corbyn
Jim Cousins
Mr. Crausby
Mary Creagh
Jon Cruddas
John Cummings
Mr. Jim Cunningham
Tony Cunningham
Mrs. Curtis-Thomas
Mr. David
Mr. Davidson
Mrs. Dean
Mr. Dhanda
Mr. Dismore
Jim Dobbin
Frank Dobson
Mr. Donohoe
Mr. Doran
Jim Dowd
Mr. Drew
Mrs. Dunwoody
Angela Eagle
Maria Eagle
Clive Efford
Mrs. Ellman
Jeff Ennis
Paul Farrelly
Lynne Featherstone
Mr. Frank Field
Jim Fitzpatrick
Mr. Flello
Caroline Flint
Barbara Follett
Mr. Michael Foster (Worcester)
Michael Jabez Foster (Hastings and Rye)
Dr. Francis
Mike Gapes
Mr. Bruce George
Mr. Gerrard
Dr. Gibson
Linda Gilroy
Mr. Godsiff
Paul Goggins
Julia Goldsworthy
Helen Goodman
Nia Griffith
Nigel Griffiths
Mr. Grogan
Andrew Gwynne
Mr. Mike Hall
Patrick Hall
Mr. David Hamilton
Mr. Fabian Hamilton
Ms Harman
Mr. Tom Harris
Nick Harvey
Mr. Havard
John Healey
Mr. Heath
John Hemming
Mr. Henderson
Mr. Hendrick
Mr. Hepburn
Mr. Heppell
Stephen Hesford
Ms Hewitt
David Heyes
Keith Hill
Meg Hillier
Margaret Hodge
Mrs. Hodgson
Paul Holmes
Mr. Hood
Mr. Hoon
Phil Hope
Kelvin Hopkins
Mr. Horwood
Stewart Hosie
David Howarth
Mr. George Howarth
Mr. Hoyle
Beverley Hughes
Chris Huhne
Mrs. Humble
Mr. Hutton
Dr. Iddon
Mr. Illsley
Mr. Ingram
Huw Irranca-Davies
Glenda Jackson
Mrs. James
Mr. Jenkins
Alan Johnson
Ms Diana R. Johnson
Helen Jones
Mr. Kevan Jones
Lynne Jones
Mr. Martyn Jones
Tessa Jowell
Mr. Joyce
Ms Keeble
Ms Keeley
Alan Keen
Ann Keen
Jane Kennedy
Mr. Khabra
Mr. Khan
Mr. Kidney
Mr. Kilfoyle
Jim Knight
Susan Kramer
Dr. Kumar
Dr. Ladyman
Norman Lamb
Mr. Lammy
Mr. Laws
Mr. Laxton
Mark Lazarowicz
Mr. Leech
David Lepper
Tom Levitt
Mr. Ivan Lewis
Martin Linton
Mr. Llwyd
Mr. Love
Ian Lucas
Mr. MacDougall
Andrew Mackinlay
Mr. MacShane
Fiona Mactaggart
Mr. Mahmood
Mr. Malik
Judy Mallaber
John Mann
Rob Marris
Mr. Marshall-Andrews
Mr. Martlew
Mr. McAvoy
Steve McCabe
Kerry McCarthy
Sarah McCarthy-Fry
Mr. McCartney
Siobhain McDonagh
John McDonnell
Mr. McFadden
Mr. McGovern
Mrs. McGuire
Shona McIsaac
Ann McKechin
Rosemary McKenna
Mr. McNulty
Mr. Meacher
Gillian Merron
Alun Michael
Mr. David Miliband
Edward Miliband
Andrew Miller
Mr. Austin Mitchell
Anne Moffat
Laura Moffatt
Chris Mole
Mrs. Moon
Margaret Moran
Jessica Morden
Julie Morgan
Kali Mountford
Mr. Mudie
Mr. Mullin
Meg Munn
Mr. Denis Murphy
Mr. Jim Murphy
Mr. Paul Murphy
Dr. Naysmith
Dan Norris
Mr. Mike O'Brien
Mr. Olner
Lembit Öpik
Sandra Osborne
Albert Owen
Dr. Palmer
Ian Pearson
Mr. Plaskitt
Mr. Pope
Stephen Pound
Mr. Prescott
Adam Price
Gwyn Prosser
Dr. Pugh
Mr. Purchase
James Purnell
Mr. Raynsford
Mr. Andy Reed
Mr. Jamie Reed
Mrs. Riordan
Angus Robertson
John Robertson
Mr. Geoffrey Robinson
Mr. Rooney
Paul Rowen
Mr. Roy
Joan Ruddock
Bob Russell
Christine Russell
Joan Ryan
Martin Salter
Mr. Sanders
Mr. Sarwar
Alison Seabeck
Jonathan Shaw
Mr. Sheerman
Jim Sheridan
Clare Short
Mr. Simon
Alan Simpson
Mr. Singh
Mr. Skinner
Mr. Slaughter
Mr. Andrew Smith
Ms Angela C. Smith (Sheffield, Hillsborough)
Jacqui Smith
Sir Robert Smith
Anne Snelgrove
Sir Peter Soulsby
Helen Southworth
Mr. Spellar
Dr. Starkey
Ian Stewart
Dr. Stoate
Graham Stringer
Ms Gisela Stuart
Andrew Stunell
Mr. Sutcliffe
Mark Tami
Ms Dari Taylor
David Taylor
Sarah Teather
Ms Thornberry
Mr. Timms
Paddy Tipping
Mr. Touhig
Jon Trickett
Mr. Truswell
Dr. Desmond Turner
Mr. Neil Turner
Derek Twigg
Keith Vaz
Joan Walley
Lynda Waltho
Claire Ward
Mr. Wareing
Mr. Watson
Mr. Watts
Steve Webb
Mr. Weir
Dr. Whitehead
Malcolm Wicks
Mr. Alan Williams
Mrs. Betty Williams
Hywel Williams
Mark Williams
Mr. Roger Williams
Stephen Williams
Mr. Willis
Jenny Willott
Mr. Winnick
Ms Rosie Winterton
Pete Wishart
Mike Wood
Mr. Woolas
Mr. Anthony Wright
Mr. Iain Wright
Dr. Tony Wright
Derek Wyatt
Richard Younger-Ross

Tellers for the Ayes:

Mr. Vernon Coaker and
Kevin Brennan


Adam Afriyie
Mr. Peter Ainsworth
Mr. Amess
Mr. Ancram
Mr. Atkinson
Mr. Bacon
Tony Baldry
Gregory Barker
Mr. Baron
Mr. Bellingham
Mr. Benyon
John Bercow
Sir Paul Beresford
Mr. Binley
Mr. Blunt
Mr. Boswell
Mr. Brazier
James Brokenshire
Angela Browning
Mr. Burrowes
Alistair Burt
Sir John Butterfill
Mr. Cameron
Mr. Carswell
Mr. Chope
Mr. Clappison
Greg Clark
Mr. Clifton-Brown
Derek Conway
Mr. Cox
Mr. Crabb
David T.C. Davies (Monmouth)
Philip Davies
David Davis (Haltemprice and Howden)
Mr. Djanogly
Mr. Dodds
Mrs. Dorries
James Duddridge
Mr. Duncan Smith
Mr. Ellwood
Mr. Evennett
Mr. Fallon
Mr. Mark Field
Mr. Forth
Dr. Fox
Mr. Francois
Mr. Fraser
Mr. Gale
Mr. Garnier
Mr. Gauke
Mr. Gibb
Mrs. Gillan
Mr. Paul Goodman
Mr. Goodwill
Michael Gove
Chris Grayling
Damian Green
Justine Greening
Mr. Grieve
Mr. Gummer
Mr. Hague
Mr. Philip Hammond
Stephen Hammond
Mr. Hands
Mr. Hayes
Mr. Heathcoat-Amory
Charles Hendry
Mr. Herbert
Mr. Hoban
Mr. Hogg
Mr. Hollobone
Mr. Holloway
Mr. Horam
Mr. Hunt
Mr. Hurd
Mr. Jack
Mr. Stewart Jackson
Mr. Jenkin
Mr. Boris Johnson
Mr. David Jones
Daniel Kawczynski
Robert Key
Miss Kirkbride
Mr. Greg Knight
Mrs. Lait
Mr. Lancaster
Mr. Leigh
Mr. Letwin
Dr. Julian Lewis
Mr. Liddell-Grainger
Mr. Lidington
Mr. Lilley
Tim Loughton
Peter Luff
Mr. Mackay
David Maclean
Anne Main
Mr. Maples
Mr. Maude
Miss McIntosh
Mr. McLoughlin
Patrick Mercer
Mrs. Maria Miller
Anne Milton
Mr. Andrew Mitchell
Mr. Moss
David Mundell
Dr. Murrison
Mr. Newmark
Mr. Stephen O'Brien
Mr. George Osborne
Richard Ottaway
Mr. Paice
Rev. Ian Paisley
Mr. Paterson
Mr. Pelling
Mike Penning
John Penrose
Mr. Pickles
Mark Pritchard
Mr. Redwood
Mr. Robathan
Hugh Robertson
Mrs. Iris Robinson
Mr. Peter Robinson
Andrew Rosindell
Andrew Selous
Grant Shapps
Mr. Shepherd
Sir Michael Spicer
Bob Spink
Mr. Spring
Sir John Stanley
Mr. Steen
Mr. Streeter
Mr. Swayne
Mr. Swire
Mr. Syms
Sir Peter Tapsell
Mr. Ian Taylor
David Tredinnick
Mr. Andrew Turner
Mr. Tyrie
Mr. Vaizey
Mr. Vara
Mrs. Villiers
Mr. Wallace
Mr. Waterson
Angela Watkinson
Mr. Whittingdale
Miss Widdecombe
Bill Wiggin
Mr. Willetts
Mr. Rob Wilson
Ann Winterton
Jeremy Wright
Sir George Young

Tellers for the Noes:

Mr. David Ruffley and
Michael Fabricant

Question accordingly agreed to.

13 Jun 2005 : Column 116

Schedule 8 agreed to.

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