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“Condition B is that the individual makes the disposal as part of the withdrawal of the individual from participation in the business”.
That may be where the ambiguity has crept in. The guidance note, however, is very clear:
“A withdrawal from participation in the business concerned relates to the ‘material disposal of business assets’...That is, it takes place when the individual reduces his or her interest in the assets of the partnership, or their holding in the company”.
Where individuals make a material disposal in the assets of the partnership or the holding of the company, they will be withdrawing from participation in the business by definition.
Kitty Ussher: The disposal referred to in the Bill is the associated disposal, and the definition that the hon. Gentleman read out from the guidance is the definition of the wider withdrawal from the overall business. I think it best that if we need to alter the draft guidance following this discussion, we do so, but I hope that when he has had an opportunity to reflect on this exchange, he will understand our point.
I am grateful to the hon. Gentleman for saying that amendments Nos. 93 and 92 have been dealt with by the Government amendments, so perhaps I can move on to amendment No. 88. This amendment seeks to extend entrepreneurs’ relief to individuals who dispose of shares acquired under enterprise management incentive options before they have held the requisite proportion of shares, and voting rights in the company for shares, for the qualifying period of 12 months.
I was asked whether the Government would take the opportunity to reaffirm our commitment to the enterprise management incentive and to employee share options and share ownership more generally. I would like to take the opportunity to do so 100 per cent. It is often extremely useful to align incentives for the work force with those of the overall organisation, and we have always sought to support that process.
The crucial point is the difference between having the option to acquire a share and the owning of the share itself. Perhaps that will tease out the issue under debate. One of the conditions for entrepreneurs’ relief to be available on a disposal of shares is that the company should have been the individual’s “personal company” for a period of 12 months. A company is an individual’s
personal company if that individual holds at least 5 per cent. of the ordinary share capital of the company, and by virtue of that holding can exercise at least 5 per cent. of the voting rights in the company. Amendment No. 88 would make a company an individual’s personal company at the time when he holds EMI options that would entitle him to 5 per cent. of the ordinary share capital, by treating the shares as acquired when he has acquired only the option.
Entrepreneurs’ relief is intended for individuals who have an active stake in the company by owning, throughout a qualifying period of a year, at least 5 per cent. of the ordinary shares, and by being able to exercise at least 5 per cent. of the voting power. Obviously, an option does not require voting power. I think that that is where the difference lies. Someone who holds only an option to acquire shares does not have the sort of stake in the company that should qualify that person for entrepreneurs’ relief. The option does not confer the rights and liabilities of a shareholder, or voting rights, as I have said.
Mr. Hammond: We have heard the Economic Secretary reaffirm the Government’s 100 per cent. commitment to the enterprise management initiative, while stripping away the principal tax advantage of it. What is the incentive for individuals thinking of taking employment with EMI qualifying companies to take up share options? Where is the benefit?
Kitty Ussher: There are wider benefits than simply being able to have a different capital gains tax requirement, such as the way in which the company might be able to develop in future and the simple value of that asset, so that is quite clear. If someone acquires shares by exercising an EMI option and as a result the company becomes his personal company, a gain on a disposal of the shares will of course qualify for entrepreneurs’ relief after he has held them for at least one year, assuming that the other conditions are satisfied. That is the same as for any other shareholder.
People acquiring shares by way of EMI options continue to benefit from generous income tax and national insurance reliefs, which also answers the hon. Gentleman’s point, and we increased the individual limit to £120,000 for EMI options from 6 April this year. There is also a technical defect in the amendment, but I have made my main point, and I urge that the amendment is not pressed to a Division. If so, it should be resisted.
I have alluded to Government amendment No. 29. It relates to the capital gains tax and entrepreneurs’ relief rules for associated disposals. The disposal of an asset may qualify as an “associated disposal” if the asset were in business use and disposed of alongside someone’s withdrawal from a business. In the Public Bill Committee, my right hon. Friend the Financial Secretary, who has joined me on the Front Bench, explained that eligibility for entrepreneurs’ relief may be restricted if the asset was only partly deployed for business use, or if the asset or individual was involved in the business for only part of the period in which the asset was used by the business. Relief may also be restricted if an individual received rent for the use of the asset by the business.
That is a sensible way to focus the relief, as in these circumstances the asset is more akin to an arm’s length investment. The Bill takes all payments of rent into account, even when rent was paid before the new rules
were introduced on 6 April. When this particular point was touched on in the Public Bill Committee, my right hon. Friend said that she would consider the case for disregarding rent received before April 2008. We are now persuaded that that is the right approach to adopt, and having examined the matter, we have concluded that it is right to disregard rent paid before entrepreneurs’ relief was introduced, in order to smooth the transition to the new regime. Amendment 29 delivers that change. I would like to move that it be part of the Bill, and I urge colleagues to resist the other amendments if they are pressed to a vote.
Mr. Hammond: I am afraid that the Economic Secretary has not dealt with the issues that amendments Nos. 89, 90 and 91 raise. It may surprise her to know that I did not dream up the problem all on my own. If I doubted my ability to analyse the complex provision, I do not doubt that of others who have pressed the point. I have read and re-read the Bill in the light of the Government’s comments. It states:
“Condition A is that an individual makes a material disposal of business assets”
“Condition B is that the individual makes the disposal”—
which the Economic Secretary has clarified as the associated disposal—
“as part of the withdrawal of the individual from participation in the business”.
The guidance notes make it clear that the satisfaction of condition A—that a material disposal of business assets has been made—constitutes a withdrawal of the individual from participation in the business because it necessarily involves the individual reducing his or her interests in the assets of the partnership or their holding in the company. Condition B will therefore be satisfied.
I do not believe that the Economic Secretary has made the case so I wish to place on record our concern that the matter could leave this place unclarified, and there is no other stage of the Bill’s passage when it could be tackled. I therefore urge my hon. Friends to support the amendment.
Question put, That the amendment be made:—
The House divided: Ayes 198, Noes 277.
AYES
Afriyie, Adam
Ainsworth, Mr. Peter
Alexander, Danny
Arbuthnot, rh Mr. James
Atkinson, Mr. Peter
Bacon, Mr. Richard
Baldry, Tony
Barker, Gregory
Baron, Mr. John
Barrett, John
Beith, rh Sir Alan
Bellingham, Mr. Henry
Benyon, Mr. Richard
Bercow, John
Beresford, Sir Paul
Binley, Mr. Brian
Boswell, Mr. Tim
Brady, Mr. Graham
Brake, Tom
Brazier, Mr. Julian
Breed, Mr. Colin
Brokenshire, James
Browne, Mr. Jeremy
Browning, Angela
Bruce, rh Malcolm
Burrowes, Mr. David
Burstow, Mr. Paul
Burt, Lorely
Butterfill, Sir John
Cable, Dr. Vincent
Campbell, rh Sir Menzies
Carmichael, Mr. Alistair
Chope, Mr. Christopher
Clappison, Mr. James
Clark, Greg
Clifton-Brown, Mr. Geoffrey
Cormack, Sir Patrick
Crabb, Mr. Stephen
Curry, rh Mr. David
Davey, Mr. Edward
Davies, David T.C. (Monmouth)
Davies, Philip
Djanogly, Mr. Jonathan
Dorries, Mrs. Nadine
Duncan, Alan
Duncan Smith, rh Mr. Iain
Dunne, Mr. Philip
Ellwood, Mr. Tobias
Evans, Mr. Nigel
Evennett, Mr. David
Fabricant, Michael
Fallon, Mr. Michael
Farron, Tim
Featherstone, Lynne
Field, Mr. Mark
Foster, Mr. Don
Fox, Dr. Liam
Francois, Mr. Mark
Fraser, Christopher
Gauke, Mr. David
George, Andrew
Gibb, Mr. Nick
Gillan, Mrs. Cheryl
Goldsworthy, Julia
Goodwill, Mr. Robert
Gove, Michael
Gray, Mr. James
Grayling, Chris
Green, Damian
Greening, Justine
Greenway, Mr. John
Grieve, Mr. Dominic
Hague, rh Mr. William
Hammond, Mr. Philip
Hammond, Stephen
Hancock, Mr. Mike
Hands, Mr. Greg
Harper, Mr. Mark
Harris, Dr. Evan
Harvey, Nick
Hayes, Mr. John
Heald, Mr. Oliver
Heathcoat-Amory, rh Mr. David
Hemming, John
Herbert, Nick
Hoban, Mr. Mark
Hogg, rh Mr. Douglas
Holloway, Mr. Adam
Holmes, Paul
Horam, Mr. John
Horwood, Martin
Hosie, Stewart
Howarth, David
Howell, John
Hughes, Simon
Huhne, Chris
Hunter, Mark
Jackson, Mr. Stewart
Jenkin, Mr. Bernard
Jones, Mr. David
Kawczynski, Daniel
Keetch, Mr. Paul
Key, Robert
Kirkbride, Miss Julie
Knight, rh Mr. Greg
Kramer, Susan
Laing, Mrs. Eleanor
Lait, Mrs. Jacqui
Laws, Mr. David
Leech, Mr. John
Liddell-Grainger, Mr. Ian
Lidington, Mr. David
Lilley, rh Mr. Peter
Llwyd, Mr. Elfyn
Maclean, rh David
MacNeil, Mr. Angus
Main, Anne
Maples, Mr. John
Maude, rh Mr. Francis
May, rh Mrs. Theresa
McCrea, Dr. William
McIntosh, Miss Anne
McLoughlin, rh Mr. Patrick
Mercer, Patrick
Milton, Anne
Mitchell, Mr. Andrew
Moss, Mr. Malcolm
Mulholland, Greg
Mundell, David
Murrison, Dr. Andrew
Newmark, Mr. Brooks
O'Brien, Mr. Stephen
Oaten, Mr. Mark
Öpik, Lembit
Osborne, Mr. George
Ottaway, Richard
Penrose, John
Price, Adam
Prisk, Mr. Mark
Pugh, Dr. John
Randall, Mr. John
Redwood, rh Mr. John
Reid, Mr. Alan
Rennie, Willie
Rifkind, rh Sir Malcolm
Robathan, Mr. Andrew
Robertson, Angus
Robertson, Mr. Laurence
Rosindell, Andrew
Ruffley, Mr. David
Russell, Bob
Scott, Mr. Lee
Selous, Andrew
Shapps, Grant
Shepherd, Mr. Richard
Simmonds, Mark
Simpson, David
Simpson, Mr. Keith
Smith, Sir Robert
Soames, Mr. Nicholas
Spicer, Sir Michael
Spring, Mr. Richard
Stanley, rh Sir John
Steen, Mr. Anthony
Streeter, Mr. Gary
Stunell, Andrew
Swayne, Mr. Desmond
Swinson, Jo
Swire, Mr. Hugo
Syms, Mr. Robert
Tapsell, Sir Peter
Teather, Sarah
Thurso, John
Timpson, Mr. Edward
Tyrie, Mr. Andrew
Vara, Mr. Shailesh
Wallace, Mr. Ben
Waterson, Mr. Nigel
Watkinson, Angela
Webb, Steve
Weir, Mr. Mike
Whittingdale, Mr. John
Wiggin, Bill
Willetts, Mr. David
Williams, Hywel
Williams, Mark
Williams, Mr. Roger
Williams, Stephen
Willis, Mr. Phil
Willott, Jenny
Wilshire, Mr. David
Wilson, Mr. Rob
Wilson, Sammy
Winterton, Ann
Wishart, Pete
Wright, Jeremy
Young, rh Sir George
Younger-Ross, Richard
Tellers for the Ayes:
Mr. Crispin Blunt and
James Duddridge
NOES
Ainger, Nick
Ainsworth, rh Mr. Bob
Allen, Mr. Graham
Anderson, Mr. David
Anderson, Janet
Armstrong, rh Hilary
Austin, Mr. Ian
Bailey, Mr. Adrian
Baird, Vera
Balls, rh Ed
Banks, Gordon
Barlow, Ms Celia
Battle, rh John
Beckett, rh Margaret
Begg, Miss Anne
Bell, Sir Stuart
Benton, Mr. Joe
Berry, Roger
Betts, Mr. Clive
Blackman, Liz
Blackman-Woods, Dr. Roberta
Blizzard, Mr. Bob
Blunkett, rh Mr. David
Borrow, Mr. David S.
Brennan, Kevin
Brown, rh Mr. Nicholas
Brown, Mr. Russell
Browne, rh Des
Bryant, Chris
Buck, Ms Karen
Burden, Richard
Burgon, Colin
Burnham, rh Andy
Butler, Ms Dawn
Byers, rh Mr. Stephen
Byrne, Mr. Liam
Caborn, rh Mr. Richard
Cairns, David
Campbell, Mr. Alan
Campbell, Mr. Ronnie
Caton, Mr. Martin
Cawsey, Mr. Ian
Challen, Colin
Chapman, Ben
Chaytor, Mr. David
Clapham, Mr. Michael
Clark, Ms Katy
Clark, Paul
Clarke, rh Mr. Tom
Clelland, Mr. David
Clwyd, rh Ann
Coaker, Mr. Vernon
Coffey, Ann
Cohen, Harry
Connarty, Michael
Cooper, Rosie
Cousins, Jim
Crausby, Mr. David
Creagh, Mary
Cummings, John
Cunningham, Mr. Jim
Curtis-Thomas, Mrs. Claire
David, Mr. Wayne
Davies, Mr. Dai
Davies, Mr. Quentin
Dhanda, Mr. Parmjit
Donohoe, Mr. Brian H.
Doran, Mr. Frank
Dowd, Jim
Durkan, Mark
Eagle, Angela
Eagle, Maria
Efford, Clive
Ellman, Mrs. Louise
Ennis, Jeff
Etherington, Bill
Farrelly, Paul
Field, rh Mr. Frank
Fisher, Mark
Fitzpatrick, Jim
Flello, Mr. Robert
Follett, Barbara
Foster, Mr. Michael (Worcester)
Foster, Michael Jabez (Hastings and Rye)
Gapes, Mike
Gardiner, Barry
Gerrard, Mr. Neil
Gibson, Dr. Ian
Gilroy, Linda
Godsiff, Mr. Roger
Goggins, Paul
Goodman, Helen
Griffith, Nia
Griffiths, Nigel
Grogan, Mr. John
Gwynne, Andrew
Hain, rh Mr. Peter
Hall, Mr. Mike
Hall, Patrick
Hamilton, Mr. David
Hamilton, Mr. Fabian
Hanson, rh Mr. David
Harman, rh Ms Harriet
Harris, Mr. Tom
Havard, Mr. Dai
Healey, John
Henderson, Mr. Doug
Hepburn, Mr. Stephen
Heppell, Mr. John
Hesford, Stephen
Heyes, David
Hill, rh Keith
Hillier, Meg
Hodge, rh Margaret
Hodgson, Mrs. Sharon
Hoey, Kate
Hoon, rh Mr. Geoffrey
Hope, Phil
Hopkins, Kelvin
Howarth, rh Mr. George
Howells, Dr. Kim
Hughes, rh Beverley
Humble, Mrs. Joan
Iddon, Dr. Brian
Illsley, Mr. Eric
Ingram, rh Mr. Adam
Irranca-Davies, Huw
Jackson, Glenda
James, Mrs. Siân C.
Jenkins, Mr. Brian
Johnson, Ms Diana R.
Jones, Helen
Jones, Mr. Kevan
Jowell, rh Tessa
Joyce, Mr. Eric
Kaufman, rh Sir Gerald
Keeble, Ms Sally
Keeley, Barbara
Kemp, Mr. Fraser
Kennedy, rh Jane
Khan, Mr. Sadiq
Kidney, Mr. David
Kilfoyle, Mr. Peter
Knight, Jim
Kumar, Dr. Ashok
Ladyman, Dr. Stephen
Laxton, Mr. Bob
Lazarowicz, Mark
Lepper, David
Levitt, Tom
Linton, Martin
Lloyd, Tony
Love, Mr. Andrew
Lucas, Ian
MacShane, rh Mr. Denis
Mactaggart, Fiona
Mahmood, Mr. Khalid
Malik, Mr. Shahid
Mallaber, Judy
Mann, John
Marris, Rob
Martlew, Mr. Eric
McAvoy, rh Mr. Thomas
McCabe, Steve
McCafferty, Chris
McCarthy, Kerry
McCarthy-Fry, Sarah
McCartney, rh Mr. Ian
McDonagh, Siobhain
McDonnell, John
McFadden, Mr. Pat
McFall, rh John
McGovern, Mr. Jim
McGuire, Mrs. Anne
McIsaac, Shona
McKenna, Rosemary
McNulty, rh Mr. Tony
Meacher, rh Mr. Michael
Meale, Mr. Alan
Merron, Gillian
Michael, rh Alun
Mitchell, Mr. Austin
Moffat, Anne
Mole, Chris
Moon, Mrs. Madeleine
Morden, Jessica
Morgan, Julie
Morley, rh Mr. Elliot
Mudie, Mr. George
Munn, Meg
Murphy, Mr. Denis
Norris, Dan
O'Brien, Mr. Mike
O'Hara, Mr. Edward
Olner, Mr. Bill
Osborne, Sandra
Owen, Albert
Palmer, Dr. Nick
Pearson, Ian
Plaskitt, Mr. James
Pope, Mr. Greg
Prentice, Bridget
Prentice, Mr. Gordon
Prosser, Gwyn
Purchase, Mr. Ken
Rammell, Bill
Raynsford, rh Mr. Nick
Reed, Mr. Andy
Reed, Mr. Jamie
Reid, rh John
Riordan, Mrs. Linda
Robertson, John
Robinson, Mr. Geoffrey
Rooney, Mr. Terry
Ruane, Chris
Ruddock, Joan
Russell, Christine
Ryan, rh Joan
Sarwar, Mr. Mohammad
Seabeck, Alison
Sharma, Mr. Virendra
Shaw, Jonathan
Sheerman, Mr. Barry
Sheridan, Jim
Simon, Mr. Siôn
Simpson, Alan
Singh, Mr. Marsha
Skinner, Mr. Dennis
Smith, rh Mr. Andrew
Smith, Ms Angela C. (Sheffield, Hillsborough)
Smith, Angela E. (Basildon)
Smith, rh Jacqui
Snelgrove, Anne
Soulsby, Sir Peter
Southworth, Helen
Spellar, rh Mr. John
Starkey, Dr. Phyllis
Stewart, Ian
Stoate, Dr. Howard
Strang, rh Dr. Gavin
Stringer, Graham
Stuart, Ms Gisela
Sutcliffe, Mr. Gerry
Tami, Mark
Taylor, Ms Dari
Taylor, David
Thomas, Mr. Gareth
Thornberry, Emily
Timms, rh Mr. Stephen
Tipping, Paddy
Todd, Mr. Mark
Touhig, rh Mr. Don
Trickett, Jon
Turner, Dr. Desmond
Turner, Mr. Neil
Twigg, Derek
Ussher, Kitty
Vis, Dr. Rudi
Walley, Joan
Waltho, Lynda
Ward, Claire
Watson, Mr. Tom
Whitehead, Dr. Alan
Wicks, Malcolm
Williams, rh Mr. Alan
Williams, Mrs. Betty
Wills, Mr. Michael
Wilson, Phil
Winnick, Mr. David
Winterton, rh Ms Rosie
Woodward, rh Mr. Shaun
Woolas, Mr. Phil
Wright, Mr. Anthony
Wright, David
Wright, Mr. Iain
Wright, Dr. Tony
Wyatt, Derek
Tellers for the Noes:
Tony Cunningham and
Mr. Dave Watts
Question accordingly negatived.
Amendment made: No. 29, page 133, line 26, at end insert—
‘Transitionals: section 169P(4)(d)
5A Section 169P of TCGA 1992 has effect in a case where the period for which the assets are in use for the purposes of the business began before 6 April 2008 as if the reference in subsection (4)(d) of that section to that period were to so much of it as falls on or after that date.’.— [Kitty Ussher.]
‘(1) The Treasury may by regulations made by statutory instrument vary the table in paragraph 1B (graduated rates for light passenger vehicles) of Schedule 1 to VERA (annual rates of duty).
(2) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.
(3) The power conferred by subsection (1) does not extend to the ending of different provision for vehicles first registered after 1 March 2001 and before 23 March 2006 and with a CO2 emissions figure exceeding 185 g/km.’.— [Justine Greening.]
Brought up, and read the First time.
Justine Greening (Putney) (Con): I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Sylvia Heal): With this it will be convenient to discuss the following:
New clause 7— Vehicle mileage costs—
‘The Treasury shall publish annually alongside the Pre-Budget report an estimate of the average cost of operating a motor vehicle (including associated running costs and depreciation) per mile for a vehicle driving 10,000 miles per year for—
(a) a vehicle registered before 1st March 2001 paying a pre-graduated Vehicle Excise Duty with an engine size 1549cc below;
(b) a vehicle registered before 1st March 2001 paying pre-graduated Vehicle Excise Duty with an engine size above 1549cc; and
(c) a vehicle registered after 1st March 2001 liable to pay graduated Vehicle Excise Duty in each of the VED bands A-M with effect from 1st April 2009.’.
New clause 8— Fuel duties: rates and rebates: general fuel duty regulator—
‘(1) HODA 1979 is amended as follows.
(2) In section 6 (excise duty on hydrocarbon oil) after subsection (1A) (as substituted by section 11 of this Act) insert—
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