House of Commons Public Bill Committee Proceedings

House of Commons

Session 2007 - 08
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Other Bills before Parliament

35

House of Commons

Thursday 22nd May 2008

Public Bill Committee Proceedings

Finance Bill

(Except Clauses 3, 5, 6, 15, 21, 49, 90 and 117

and new Clauses amending section 74 of the Finance Act 2003)

[Eleventh and Twelfth sittings]

Clause 50 Agreed to.

Schedule 19 Agreed to.

Clauses 51 and 52 Agreed to.

Jane Kennedy

Agreed to  126

Schedule  20,  page  264,  line  36,  leave out paragraph (a).

Schedule, as amended, Agreed to.

Clause 53 Agreed to.

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Withdrawn  133

Clause  54,  page  27,  leave out lines 14 to 16 and insert—

‘(a)
a transaction or arrangement entered into on or after 12th March 2008, or

(b)
an asset acquired on or after 12th March 2008,

but does not relate to an asset acquired on or after that date pursuant to a

pre-commencement contract (see subsection (5)).

(5)
For the purposes of subsection (4) a contract is a “pre-commencement contract”

if—

(a)
the contract is a contract in writing made before 12th March 2008;

(b)
no terms remain to be agreed on or after that date;

Public Bill Committee Proceedings: May 2008
36

Finance Bill, continued

(c)
under the terms of the contract the acquisition of the asset on or after that

date had already become obligatory on that date; and

(d)
the contract is not varied in a significant way on or after that date.’.

Clause Agreed to.

Mr Jeremy Browne

Dr Vincent Cable

Mr Colin Breed

Dr John Pugh

Negatived on division  132

Clause  55,  page  27,  line  31,  leave out subsection (4).

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Not called  134

Clause  55,  page  27,  line  31,  leave out ‘are treated as always having had effect’ and

insert ‘shall have effect from 6th April 2008’.

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Not called  135

Clause  55,  page  27,  line  33,  leave out subsections (5) and (6).

Clause Agreed to.

Clauses 56 and 57 Agreed to.

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Negatived on division  136

Schedule  21,  page  274,  line  22,  at end insert ‘, and

(c)
the trade is carried on with the intention of generating a loss for tax

avoidance purposes.’.

Schedule Agreed to on division.

Public Bill Committee Proceedings: May 2008
37

Finance Bill, continued

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Withdrawn  137

Schedule  22,  page  279,  line  21,  leave out from ‘(1A)’ to ‘when’ and insert ‘Any

credits or debits relating to any amount which would otherwise fall’.

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Not called  138

Schedule  22,  page  279,  line  26,  after ‘advantage’, insert ‘as a result of that amount

being treated as a distribution’.

Jane Kennedy

Agreed to  127

Schedule  22,  page  279,  line  34,  at end insert—

‘Disposals for consideration not recognised by accounting practice

3A  (1)
In Schedule 9 to FA 1996 (loan relationships: special computational

provisions), after paragraph 11A insert—

“Disposals for consideration not fully recognised by accounting practice

11B(1)
This paragraph applies where in any accounting period (“the

relevant accounting period”) a company, with the relevant

avoidance intention, disposes of rights under a creditor relationship

(in whole or in part) for consideration which—

(a)
is not wholly in the form of money or a debt that falls to be

settled by the payment of money, and

(b)
is not fully recognised.

      (2)
The relevant avoidance intention is the intention of eliminating or

reducing the credits to be brought into account for the purposes of

this Chapter.

      (3)
Consideration is not fully recognised if, as a result of the application

of generally accepted accounting practice, the full amount or value

of the consideration is not recognised in determining the company’s

profit or loss for the relevant accounting period or any other

accounting period.

      (4)
In determining the credits to be brought into account by the

company for the period for the purposes of this Chapter, it is to be

assumed that the whole of the consideration is recognised in

determining the company’s profit or loss for the relevant

accounting period.

      (5)
But this paragraph does not apply if paragraph 1(2) of Schedule

28AA to the Taxes Act 1988 (provision not at arm’s length)

operates in relation to the disposal so as to increase the tax liability

of the company.”

      (2)
In Schedule 26 to FA 2002 (derivative contracts), after paragraph 27 insert—

Public Bill Committee Proceedings: May 2008
38

Finance Bill, continued

“Disposals for consideration not fully recognised by accounting practice

27A(1)
This paragraph applies where in any accounting period (“the

relevant accounting period”) a company, with the relevant

avoidance intention, disposes of rights or liabilities under a

derivative contract (in whole or in part) for consideration which—

(a)
is not wholly in the form of money or a debt that falls to be

settled by the payment of money, and

(b)
is not fully recognised.

      (2)
The relevant avoidance intention is the intention of eliminating or

reducing the credits to be brought into account for the purposes of

this Schedule.

      (3)
Consideration is not fully recognised if, as a result of the application

of generally accepted accounting practice, the full amount or value

of the consideration is not recognised in determining the company’s

profit or loss for the relevant accounting period or any other

accounting period.

      (4)
In determining the credits to be brought into account by the

company for the period for the purposes of this Schedule, it is to be

assumed that the whole of the consideration is recognised in

determining the company’s profit or loss for the relevant

accounting period.

      (5)
But this paragraph does not apply if paragraph 1(2) of Schedule

28AA to the Taxes Act 1988 (provision not at arm’s length)

operates in relation to the disposal so as to increase the tax liability

of the company.”

      (3)
The amendments made by this paragraph have effect in relation to disposals on

or after 16 May 2008.’.

Jane Kennedy

Agreed to  128

Schedule  22,  page  279,  line  34,  at end insert—

‘Avoidance relying on continuity of treatment provisions

3B  (1)
In paragraph 12 of Schedule 9 to FA 1996 (loan relationships: continuity of

treatment), after sub-paragraph (2C) insert—

“(2D)
This paragraph does not apply where—

(a)
the transferor company is party to arrangements in

accordance with which there is likely to be a transfer of

rights or liabilities under the loan relationship by the

transferee company to another person in circumstances in

which this paragraph would not apply, and

(b)
the purpose, or one of the main purposes, of the

arrangements is to secure a tax advantage for the transferor

company or a person connected with it.

    (2E)
In sub-paragraph (2D) above—

(a)
“arrangements” includes any agreement, understanding,

scheme, transaction or series of transactions,

(b)
“tax advantage” has the meaning given by section 840ZA

of the Taxes Act 1988, and

Public Bill Committee Proceedings: May 2008
39

Finance Bill, continued

(c)
“transfer” includes any arrangement which equates in

substance to a transfer (including an acquisition or

disposal, or increase or decrease, in a share of the profits or

assets of a partnership);


and section 839 of the Taxes Act 1988 (connected persons) applies

for the purposes of that sub-paragraph.

    (2F)
This paragraph does not apply in relation to a disposal if paragraph

11B above applies in relation to it.”

      (2)
In paragraph 28 of Schedule 26 to FA 2002 (derivative contracts: continuity of

treatment), after sub-paragraph (3ZA) insert—

“(3ZB)
This paragraph does not apply where—

(a)
the transferor company is party to arrangements in

accordance with which there is likely to be a transfer of

rights or liabilities under the derivative contract by the

transferee company to another person in circumstances in

which this paragraph would not apply, and

(b)
the purpose, or one of the main purposes, of the

arrangements is to secure a tax advantage for the transferor

company or a person connected with it.

  (3ZC)
In sub-paragraph (3ZB) above—

(a)
“arrangements” includes any agreement, understanding,

scheme, transaction or series of transactions,

(b)
“tax advantage” has the meaning given by section 840ZA

of the Taxes Act 1988, and

(c)
“transfer” includes any arrangement which equates in

substance to a transfer (including an acquisition or

disposal, or increase or decrease, in a share of the profits or

assets of a partnership);


and section 839 of the Taxes Act 1988 (connected persons) applies

for the purposes of that sub-paragraph.

  (3ZD)
This paragraph does not apply in relation to a disposal if paragraph

27A applies in relation to it.”

      (3)
The amendments made by this paragraph have effect in relation to transactions

taking place, or a series of transactions of which the first takes place, on or after

16 May 2008.’.

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Withdrawn  139

Schedule  22,  page  280,  line  7,  at end insert ‘to the extent that such debits exceed

the aggregate amount of credits brought into account under this Chapter in that or any

previous accounting period in respect of that share’.

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Not called  140

Schedule  22,  page  280,  leave out line 8.

Public Bill Committee Proceedings: May 2008
40

Finance Bill, continued

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Not called  141

Schedule  22,  page  280,  line  13,  at end insert ‘to the extent that such debits exceed

the aggregate amount of credits brought into account under this Chapter in that or any

previous accounting period in respect of that share.’.

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Not called  142

Schedule  22,  page  280,  leave out line 14.

Jane Kennedy

Agreed to  129

Schedule  22,  page  280,  line  40,  at end insert—

‘Non-qualifying shares

10A(1)
In section 91B(5)(a) of FA 1996 (debits and credits to be brought into account

where Condition 3 in section 91E is satisfied), omit “by the investing

company”.

      (2)
The repeal made by sub-paragraph (1) has effect in relation to credits and

debits relating to any time on or after 16 May 2008.’.

Jane Kennedy

Agreed to  130

Schedule  22,  page  280,  line  40,  at end insert—

‘Income producing assets

10B(1)
In section 91C(3) of FA 1996 (assets which are income producing), for

paragraph (c) substitute—

“(c)
any share as respects which the condition in section 91D(1)(b)

below is satisfied;”.

      (2)
The amendment made by sub-paragraph (1) has effect in relation to times on

or after 16 May 2008.’.

Jane Kennedy

Agreed to  131

Schedule  22,  page  284,  line  28,  after ‘Accordingly’, insert—

‘(a)
in section 91A(7)(a) of FA 1996, omit “(see section 103(3A))”, and

(b)
’.

Mr Phillip Hammond

Mr Mark Hoban

Mr David Gauke

Justine Greening

Not called  143

Schedule  22,  page  284,  line  28,  at end insert—

‘(2A)
In section 91A(7) FA 1996 omit the words ‘(see section 103(3A)).’.

Public Bill Committee Proceedings: May 2008
41

Finance Bill, continued

Schedule, as amended, Agreed to.

Clause 60 Agreed to.

Schedule 23 Agreed to.

Jane Kennedy

Agreed to  119

Clause  61,  page  30,  line  26,  leave out paragraph (b) and insert—

‘(b)
any income which accrues during that period to a partnership of which

the company is a partner, apportioned between the company and the other

partners on a just and reasonable basis.’.

Jane Kennedy

Agreed to  120

Clause  61,  page  30,  line  33,  at end insert—

  ‘(4D)
In sub-paragraph (4B)(b), “partnership” includes an entity established under

the law of a country or territory outside the United Kingdom of a similar

character to a partnership; and “partner” is to be read accordingly.”’.

Jane Kennedy

Agreed to  121

Clause  61,  page  30,  line  42,  leave out paragraph (b) and insert—

‘(b)
any income which accrues during that period to a partnership of which

the company is a partner, apportioned between the company and the other

partners on a just and reasonable basis.’.

Jane Kennedy

Agreed to  122

Clause  61,  page  30,  line  48,  at end insert—

  ‘(5E)
In sub-paragraph (5C)(b), “partnership” includes an entity established under

the law of a country or territory outside the United Kingdom of a similar

character to a partnership; and “partner” is to be read accordingly.”’.

Question proposed, That the Clause, as amended, stand part of the Bill

[Adjourned till Tuesday 3rd June at 10.30 a.m.