House of Commons
|Session 2007 - 08|
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General Committee Debates
The Committee consisted of the following Members:
Alan Sandall, James Davies, Committee Clerks
attended the Committee
Public Bill Committee
Thursday 5 June 2008
[Frank Cook in the Chair]
(Except clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new clauses amending section 74 of the Finance Act 2003)
Mr. Philip Hammond (Runnymede and Weybridge) (Con): On a point of order, Mr. Cook. Is it not customary that it is the Governments responsibility to ensure a quorum in the Committee, using Government Members? Is it not unusual to have a Committee dependent for its quorum on Opposition Members?
The Chairman: I am tempted to inquire how long the hon. Gentleman has been a Member of the House. He ought to know that there is no such responsibility. A quorum is a quorum is a quorum.
Abolition of allowances: consequential amendments and savings
Amendment made: No. 148, in schedule 27, page 322, line 35, at end insert
(1) Sub-paragraph (2) applies if
(a) an initial allowance has been made under Part 3 of CAA 2001 in respect of qualifying enterprise zone expenditure, and
(b) an event occurs in relation to the building on which the expenditure was incurred which, if section 307 of that Act (withdrawal of allowance if building not industrial building when first used etc) remained in force, would result in the allowance being withdrawn.
(2) Unless the event occurs more than 7 years after the end of the chargeable period for which the allowance was made, the allowance is to be withdrawn as if that section remained in force..[Jane Kennedy.]
Schedule 27, as amended, agreed to.
Clauses 82 to 84 ordered to stand part of the Bill.
Power to make consequential and transitional provision
Mr. Jeremy Browne (Taunton) (LD): I beg to move amendment No. 185, in clause 85, page 47, line 33, leave out paragraph (b).
No. 186, in clause 85, page 47, line 36, leave out from (2) to end of line 37 and add
may not be made unless a draft of the regulations has been laid before, and approved by a resolution of, the House of Commons..
Clause 85 allows the Treasury to make consequential and transitional provisions in relation to clauses 68 to 84. That is a catch-all power, and it includes the clauses on the abolition of industrial and agricultural buildings allowances, which we discussed at length in the previous sitting. Amendment No. 185 would remove paragraph (b) from subsection (4), which allows any changes to have retrospective effect providing that the provision
does not increase any persons liability to tax.
Amendment No. 186 would remove the negative resolution procedure and introduce the positive resolution procedure for any changes made under the clause.
I tabled the amendments to seek assurances on a couple of matters. First, I would like to ask the Financial Secretary whether paragraph (b) will allow the Government retrospectively to alter provisions to reduce allowances, for example by reducing the phasing-out levels for agricultural buildings allowances from those decided in clause 82. Will the right hon. Lady explain whether there is scope for changing the goal posts agreed in subsequent finance Bills? Secondly, do the Government think that it is appropriate to use statutory instruments and the negative resolution procedure to introduce retrospective provisions?
The context for this part of our deliberations is, as we discussed at length on Tuesday afternoon, the widespread concern that people who made planning assumptions about their business investments, in some cases dating back to the 1980s, as well as people who made those assumptions as recently as the middle of the current decade, will be adversely affected by the changes. However, at least they now know the scope of that adverse effect. They know that the tapering-out will leave them worse off, but they can make calculations about how much worse off they will be and make adjustments. Given the state of the public finances, I am seeking reassurance from the Minister that the goal posts will not be further moved in subsequent Bills; for example, that the tapering-out will not take place more rapidly than envisaged in the legislation.
The Financial Secretary to the Treasury (Jane Kennedy): It is a pleasure to serve under your chairmanship, Mr. Cook. It is a very fine day and I hope that we can bring that good atmosphere into the Committee, as has been our practice so far in our debates.
Given the scale of the reforms that we have been considering in the last few clauses14 of the last 17 clauses having been part of the package business tax reforms announced in 2007it is possible that some of the consequential amendments that need to be made to other Acts, which refer to legislation that has been repealed or changed significantly, have been missed. The hon. Member for Taunton has tabled a probing amendment to ascertain the purpose of the powers that we would take under the clause. I hope to reassure him by saying that they could be used only to relieve tax, but not in a way that would be detrimental to a taxpayer. The clause provides the power to make any transitional
Mr. Browne: I am grateful to the Minister for her reassurance, and I am happy to beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 85 ordered to stand part of the Bill.
Balancing allowances on transfers of trade
Mr. Hammond: I beg to move amendment No. 218, in clause 86, page 48, line 29, leave out subsection (4) and insert
(4) Where this section applies
(a) section 343(2) shall apply, but as if the words and are subject to section 343A (company reconstructions involving business of leasing plant or machinery) were omitted; and
(b) section 343A shall not apply..
This is a technical drafting amendment, the authorship of which I do not claim. It comes from the Law Society, which is concerned about the lack of clarity in the drafting of subsection (4). The amendment intends to clarify the intention of that subsection so that it is clear that in a case to which the anti-avoidance provisions of clause 86 apply, section 343(2) of the Income and Corporation Taxes Act 1988 would be omitted and, separately, that section 343(A) would not apply in a case to which this anti-avoidance section applies. There is no question about what the provision is trying to achieve, but the wording in the Bill is clumsy and is capable of more than one interpretation. The Law Society has proposed that subsection (4) be divided into two paragraphs, so that it says clearly where section 343(2) should apply, but as if the words,
and are subject to section 343(A)
were omitted, and, separately, that section 343(A) itself shall not apply. I hope the Minister can confirm that the Law Societys interpretation is correct, and that the amendment does not change what the Government intended. If she will not accept our amendment, will she at least place on record an acknowledgement that the interpretation as per the amendment is correct for future guidance of Her Majestys Revenue and Customs decision-makers and the courts?
Jane Kennedy: Amendment No. 218 does no more than seek to clarify the intention of clause 86 (4). I appreciate the way in way in which the hon. Gentleman moved it, and it may help if I explain how subsection (4) works. This will be quite a technical reply, but it is a proper and technical amendment, which has the same effect as the subsection that it seeks to amend. I will try to explain why we do not believe that it is necessary.
Subsection (4) of new section 343ZA applies section 343(2) of the Income and Corporation Taxes Act 1988 to transactions that fall within the scope of the new section. Section 343(2) is one of its main operative provisions, providing that a trade is treated as not ceasing and commencing for the purposes of the Capital Allowances Act. This is the effect that is needed for the new clause.
However, section 343(2) ends with words that ensure it normally applies subject to the provisions of section 343A. As section 343A ensures that section 343 does not apply in some circumstances, it could have the effect of allowing a trade to be treated as ceased. Therefore, in applying section 343(2) to new section 343ZA, it is necessary to ensure that section 343A does not affect the outcome. This is achieved by omitting the closing words of section 343(2). It is at moments like this that I wish I was next door in Committee Room 9 debating the Human Fertilisation and Embryology Bill.
This is the effect of subsection (4) of new clause 343ZA. The proposed amendment would have the same effect. We can debate the elegance of the wording, but our advice is that the wording in the Bill is what is required to have the effect I have described. I believe that new subsection (4) is unambiguous and there is no need to make the amendment. It would be interesting to hear the views of the Law Society after that explanation. I ask the hon. Gentleman to withdraw the amendment.
Mr. Hammond: As the hon. Gentleman says, that is clear. How the right hon. Lady can suggest that that is unambiguous is slightly beyond me. I am quite sure that it is fairly ambiguous. It emphasises how complex the tax code is. The important point is that although I do not pretend to have followed precisely the logic of her explanation, as she read it out, those who need to interpret this statute will not only have followed it, they will be able to refer to it. Therefore the matter is clarified for the future guidance of HMRC practitioners and, if ever necessary, the courts. The purpose of the amendment has been served, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 86 ordered to stand part of the Bill.
Clauses 87 and 88 ordered to stand part of the Bill.
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