Angela
Eagle: Welcome to the Chair, Mr. Hood. I note
that the hon. Member for Hammersmith and Fulham has fled at the thought
of Japanese knotweed, probably to check that there is none in his
garden. It is not a plant that one would want to find flourishing
anywhere near anything that the members of this Committee
value.
Land
remediation relief was introduced in 2001 to encourage owners and
investors to bring contaminated land back into use by providing
enhanced tax relief. The Government are committed to increasing housing
supply and to maintaining a high proportion of development on
brownfield sites. The 2004 Barker review of housing supply and the 2006
review of land use and planning recommended that land remediation
relief be extended to derelict land. In the light of those
recommendations, the clause and schedule will extend land remediation
relief to provide enhanced tax relief for the costs of dealing with
specific forms of dereliction, which, up until now, have prevented
sites from being brought back into
use. The
scope of the legislation is based on a consultation carried out by the
Treasury in 2007 and subsequent discussions with a broad range of
stakeholders, including representatives from the Government, local
government, industry, development agencies and the charitable sector.
We recognise that the responses to the consultation show that a lack of
certainty about what qualifies under the existing relief may have
reduced the effectiveness of land remediation relief. That lack of
certainty has meant that industry has not factored the relief into
costings, with the result that the existing relief did not exert as
much influence on investment decisions as we would have liked. The
changes in the Bill are intended to give companies greater certainty,
enabling the industry to include the relief fully in their projected
costings. In
recent years, companies have exploited the relief by claiming for work
on greenfield sites or brownfield sites not contaminated by previous
industrial use, which is contrary to the policy intention. Schedule 7
will therefore refocus the existing relief on contaminated brownfield
sites and exclude expenditure on greenfield sites. The hon. Gentleman
was uncharacteristically uncharitable about Government amendments 8 and
9 to schedule 7. They will make minor drafting improvements for the
provisions in the
schedule—
The
Chairman: Order. The Minister knows that we will discuss
that when we come to the
schedule.
Angela
Eagle: I was responding to the observations that were made
by the hon. Member for Fareham, Mr. Hood. I am more than
happy to come back to those points, which I do not think are major,
when we get to that part of the
schedule. Question
put and agreed to.
Clause
26 accordingly ordered to stand part of the Bill.
Schedule
7Contaminated
and derelict
land
Angela
Eagle: I beg to move amendment 8, in
schedule 7, page 96, line 29, after
‘acquisition’, insert
‘by the company of a major interest
in the land’.
The
Chairman: With this it will be convenient to discuss
Government amendment
9.
Angela
Eagle: I was commenting that the hon. Member for Fareham
was rather less than charitable about the fact that, after consultation
in the sensitive area, two Government amendments have been tabled. They
are very minor in nature, and they have been tabled because the
parliamentary counsel decided that his earlier draft was unsatisfactory
and had to be amended to provide clarity. I suspect that the amendment
is about translating policy intention into legalese, rather than any
major change in policy intention that happened between the printing of
the Bill and amendments being
tabled. Amendment
8 will make it clear that the land has to have been contaminated when
the major interest in it was acquired, and not when the life assurance
business acquired any other interest in the land, such as a short
lease. It will put the certainty of the meaning beyond doubt and will
clear up points that were not as clear as the parliamentary counsel
would have
wished. Under
amendment 9, a company will be able claim land remediation relief under
cost of qualifying works subcontracted to a connected party. As
drafted, there are differences in the wording of the section that gives
the relief and the section that quantifies the qualifying expenditure,
which could create uncertainty. Amendment 9 removes that uncertainty by
amending the legislation so that the same wording is used in all
sections, which is a good principle to adopt when drafting Finance
Bills, however thick they are and however many clauses they
contain.
Mr.
Hoban: I have a quick question. The explanatory notes
state that one of the reasons that the amendments are being made is to
show that land has to be contaminated at the time that a major interest
in the land is acquired for the expenditure to qualify for relief. If
someone has a site that has been invaded by Japanese knotweed, what
relief is available if they want to remove it from the
land?
Angela
Eagle: I think the best way to deal with such a specific
question about Japanese knotweed would be for me to write to the hon.
Gentleman. I would not want to give him the wrong advice on this evil
plant. Amendment
8 agreed to.
Amendment
made: 9, in
schedule 7, page 98, line 28, leave
out ‘ “sub-contractor payment” substitute
“connected sub-contractor payment’ and insert
‘ “sub-contracted land
remediation” substitute “connected sub-contracted land
remediation” ’.—(Angela
Eagle.) Schedule
7, as amended, agreed
to. Clause
27 ordered to stand part of the
Bill.
Schedule
8Venture
capital
schemes
Angela
Eagle: I beg to move amendment 13, in
schedule 8, page 101, line 4, leave
out from beginning to ‘is’ in line 5 and
insert— ‘A1
Schedule 5B to TCGA 1992 (enterprise investment scheme: re-investment)
is amended as follows.
A2 (1) Paragraph 1(2) (application of Schedule) is
amended as follows. (2) For
paragraphs (g) and (h) substitute
“and (g) all of the
money raised by the issue of the shares (other than any of them which
are bonus shares) is, no later than the time mentioned in section
175(3) of ITA 2007, employed wholly for the purpose of that
activity,”. (3) In the
words following the paragraphs, for “conditions in paragraphs
(g) and (h) above do” substitute “condition in paragraph
(g) above does”. A3 (1)
Paragraph 1A (failure of conditions of application) is amended as
follows. (2) In sub-paragraph
(4)— (a) omit “or
(h)”, and (b) for
“sub-paragraph (4A) below” substitute “section
175(3) of ITA 2007”. (3)
Omit sub-paragraph (4A). 1 (1)
Paragraph 9 (other reconstructions and
amalgamations)’.
The
Chairman: With this it will be convenient to discuss
Government amendments 14 to
17.
Angela
Eagle: The tax-based venture capital schemes—the
enterprise investment scheme, venture capital trusts and the corporate
venturing scheme—all contribute to the Government’s
policy of improving the ability of small companies to secure
longer-term support through equity investments. Such investments help
small companies to grow and invest in their business, so that they are
well placed to take advantage of business opportunities. Encouraging
investment is even more important in the light of the economic
challenges that we now face. Investment in the future is crucial if the
UK is to emerge from the recession with a stronger, more prosperous
economy. At
Budget 2008, the Chancellor lunched a public consultation on the
enterprise investment scheme to investigate how the rules and processes
that govern the scheme could be improved or simplified. As a result of
representations made during that consultation, schedule 8
introduces four changes.
On the
enterprise investment scheme, the schedule relaxes the time limits in
relation to the employment of money invested; removes the link to other
shares of the same class issued at the same time as qualifying shares;
extends the period for carry-back of relief and allows the full amount
subscribed for to be carried back, subject to the annual investment
limit; and corrects an anomaly regarding the capital gains position of
investors in the event of a share-for-share exchange. On the corporate
venturing and venture capital trusts schemes, the schedule relaxes the
time limits in relation to the employment of money by companies
receiving investment. All four changes simplify the rules of the
schemes and remove current restrictions. The Government amendments
merely make minor
changes. Amendment
13 agreed to.
Mr.
Hoban: I beg to move amendment 27, in
schedule 8, page 101, line 12, at
end insert— ‘(1B) The
individual may elect for section 135 or section 136 not to apply in
respect of the shares.’.
The amendment
is straightforward. It would reinstate reliefs that were there in the
first place. It also seeks to address an iniquity in paragraph 9 of
schedule 5B to the Tax and Capital Gains Act 1992. The Government
propose to apply sections 135 and 136 of the 1992 Act to shares to
which deferral relief is attributable. Thus, when an EIS company is
acquired in a share-for-share exchange, the gain that arises on the EIS
deferral relief shares is not taxed, but held over against the shares
received in the exchange. The deferred gain falls back into charge to
tax, as would be expected. Previously, sections 135 and 136 of the 1992
Act were excluded from applying, such that an investor would have to
pay tax on the deferred gain and the deferral relief shares at a time
when they would have received no cash out of which to pay the tax,
because they had received shares and not cash on disposal.
However, the
changes that the Government propose have the effect of preventing a
claim for loss relief, which was previously available, if the deferral
relief shares stood at a loss against the subscription price at the
time of the share-for-share exchange. That loss could be relieved
against the deferral gain, which falls into charge to capital gains tax
or against income by making a claim under section 131 of the Income
Taxes Act 2007. In general in tax law, it is a principle that the
taxpayer should not have to pay tax on a gain at a time when they have
no cash to pay the tax. Under the Bill, if amendment 27 is not made,
the investor will have a deferred gain falling into charge to tax when
they have no cash at their disposal out of which to pay the tax and
they will not be able to reduce that liability by any loss on the
shares.
I think that
I have proposed a fairly straightforward change, to reinstate a relief
that existed before the Government proposed their
amendments.
Angela
Eagle: It may be helpful if I explain briefly the problem
that we were trying to address in paragraph 1 of schedule 8, before
setting out why amendment 27 is unnecessary and undesirable.
Under the
enterprise investment scheme, an investor may take the proceeds from
the sale of an asset and invest them in shares. Any capital gains tax
payable on gains from those proceeds is then deferred, but not
cancelled. If the shares are exchanged for new shares, the deferred
gain is brought back into charge. That was always intended. However,
capital gains tax can also arise on the exchanged shares at the same
time as the deferred gain comes into charge, which was not intended.
That would happen for an EIS shareholder but not for a non-EIS
shareholder exchanging their shares. The result could be a gain with
tax to pay or a loss that could be set against other gains or against
income. Therefore, EIS shareholders could be placed at either an
advantage or a disadvantage compared with other shareholders.
The hon.
Gentleman seems to be concerned that if a loss cannot be crystallised
immediately, it is gone forever, but that is not the case. I hope that
I can reassure him by saying that any loss arising from subsequent
disposal of the new shares received in the exchange will be able to be
set against other gains. I hope that the hon. Gentleman will agree that
what I suspect was the reason for the amendment in the first place is
actually mitigated by the current arrangements.
Allowing
enterprise investment scheme investors to choose to disapply a part of
the tax rules, which amendment 27 would do, would be unfair
to other investors, to whom the relevant sections of the 1992
Act—sections 135 and 136—would apply. However, it would
create a fundamentally wrong tax position, with the investor able to
opt out of paying tax on a gain, but able to opt in to obtaining relief
on a loss.
I ask the
hon. Gentleman to withdraw the amendment in the hope that he is
reassured that what I think is the reason why it was tabled is already
covered.
Mr.
Hoban: I shall cogitate on the Minister’s response,
to ensure that I feel that she has addressed my concerns carefully. On
that basis, I beg to ask leave to withdraw the amendment.
Amendment,
by leave,
withdrawn. 6.30
pm Amendments
made: 14, in
schedule 8, page 101, line 18, at
end insert— ‘1A In
paragraph 16 (information), omit sub-paragraph
(4A).’. Amendment
15, in
schedule 8, page 102, line 19, at
end
insert— ‘Consequential
repeals 5A In consequence of
the amendments made by paragraphs A2, A3 and 1A,
omit— (a) in FA 2001, in Schedule
15, paragraphs 26 to 28, (b) in
FA 2004, in Schedule 18, paragraph 13(1)(f),
and (c) in ITA 2007, in
Schedule 1, paragraph 345(2)(b), (3)(a) and
(13)(b).’. Amendment
16, in
schedule 8, page 102, line 20, at
end insert— ‘5B The
amendments made by paragraphs A2, A3, 1A, 3, 4 and 5A have effect in
relation to shares issued on or after 22 April
2009.’. Amendment
17, in
schedule 8, page 102, line 32, leave
out paragraph 8.—(Angela
Eagle.) Schedule
8, as amended, agreed
to.
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