Finance Bill

The Committee consisted of the following Members:

Chairs: Mr David Amess  , Mr Peter Bone  , Mr Jim Hood  , †Jim Sheridan 

† Baldwin, Harriett (West Worcestershire) (Con) 

† Barclay, Stephen (North East Cambridgeshire) (Con) 

† Blenkinsop, Tom (Middlesbrough South and East Cleveland) (Lab) 

† Burley, Mr Aidan (Cannock Chase) (Con) 

Elphicke, Charlie (Dover) (Con) 

† Garnier, Mark (Wyre Forest) (Con) 

† Gauke, Mr David (Exchequer Secretary to the Treasury)  

† Gilmore, Sheila (Edinburgh East) (Lab) 

† Gyimah, Mr Sam (East Surrey) (Con) 

† Hamilton, Fabian (Leeds North East) (Lab) 

† Hands, Greg (Chelsea and Fulham) (Con) 

Harrington, Richard (Watford) (Con) 

† Hilling, Julie (Bolton West) (Lab) 

† Hoban, Mr Mark (Financial Secretary to the Treasury)  

† Jamieson, Cathy (Kilmarnock and Loudoun) (Lab/Co-op) 

† Kirby, Simon (Brighton, Kemptown) (Con) 

Lavery, Ian (Wansbeck) (Lab) 

† McKenzie, Mr Iain (Inverclyde) (Lab) 

† McKinnell, Catherine (Newcastle upon Tyne North) (Lab) 

† Malhotra, Seema (Feltham and Heston) (Lab/Co-op) 

† Mann, John (Bassetlaw) (Lab) 

† Mearns, Ian (Gateshead) (Lab) 

† Mills, Nigel (Amber Valley) (Con) 

† Morrice, Graeme (Livingston) (Lab) 

† Morris, Grahame M. (Easington) (Lab) 

† Pugh, John (Southport) (LD) 

† Rees-Mogg, Jacob (North East Somerset) (Con) 

† Reeves, Rachel (Leeds West) (Lab) 

† Smith, Miss Chloe (Economic Secretary to the Treasury)  

† Swales, Ian (Redcar) (LD) 

† Syms, Mr Robert (Poole) (Con) 

† Williams, Stephen (Bristol West) (LD) 

† Williamson, Gavin (South Staffordshire) (Con) 

Wilson, Sammy (East Antrim) (DUP) 

Simon Patrick, James Rhys, Committee Clerks

† attended the Committee

Public Bill Committee 

Thursday 14 June 2012  

(Morning)  

[Jim Sheridan in the Chair] 

Finance Bill

(Except clauses 1, 4, 8, 189 and 209, schedules 1, 23 and 33, and certain new clauses and new schedules)

The Chair:  Order. As you can see, we are having problems with the annunciators, but I am assured that they are being worked on. Hopefully, they will be sorted out in the not-too-distant future. 

Clause 33 

Company distributions 

Question proposed, That the clause stand part of the Bill. 

9 am 

Rachel Reeves (Leeds West) (Lab):  It is a pleasure to serve under your chairmanship this morning, Mr Sheridan. The clause is designed to align the tax treatment of transfers between UK resident companies with transfers between UK and non-UK resident companies, by allowing transfers between UK companies to be treated as distributions for the purposes of UK tax legislation. I understand that the proposal arises from the joint working group and was identified as an area of difficulty by Her Majesty’s Revenue and Customs. Has the Minister considered the impact of cuts to HMRC’s budget on its ability to deliver such technical changes, which go back to a repeal of advance corporation tax by the Finance Act 1998? 

As a rule, we permit a company to make dividend distributions only up to the balance of earnings that are available for distribution according to its most recent audited accounts. Some exceptions, of course, exist—for example, for distributions of company shares in the event of winding up. 

In 2009, new rules replaced the system for tax and dividends from the UK and overseas companies following a legal ruling the year before in which the European court decided to exempt European Union and European economic area residents’ subsidiary distributions from tax in the UK rather than taking an approach to taxing dividends depending on the residency of the dividend payer. 

The 2009 Act, however, requires some alterations. As is often the case with technical regulations, unintended issues arose. Some were addressed in the Finance Bill last year, but they need further attention today, hence the reason for the clause. The changes will apply only to groups of companies operating in the UK and making distributions between themselves. Is the Minister aware of any anomalies relating to the tax treatment of

distributions from non-UK companies, and will the changes have any impact on dividends and trusts that receive dividends from such companies? How many transfers caught by this rule does he estimate take place every year and how many companies does he estimate that it applies to? 

In the impact assessment it was noted that there would be a small cost to HMRC associated with this measure. Has the Minister calculated what the cost will be and why it occurs? 

John Mann (Bassetlaw) (Lab):  Mr Sheridan, good morning to you. It is good to see you in your Chair. As the more observant members of the Committee will note, whenever there is a Chair of the Committee from the Opposition, the sun shines. One could be suspicious. This may be the workings of the Chairman’s Panel, because it could be that someone in Brussels is manipulating the clouds above our heads. That is the purpose of the question that I wish to pose. In our previous sitting, there was some ambiguity about the slavish support for European Union legislation impeding our ability to set our own taxes in this country. That emanated from the Conservative party. I can confirm that all the legislation that handed powers over to Brussels to interfere with our ability to determine our own taxes was initiated and agreed by the Conservative party in power. 

I appreciate that the Ministers are distracted, because at the current time there are 17 directives or draft directives relating purely to financial services and their Treasury remit on the table in Brussels at the moment. Ministers must be prostrating themselves at the altar of Brussels on a regular basis. Has anything in the clause been impacted on by the European Union? Has the Government’s freedom to introduce their proposal been restricted by what the Conservative party forced through Parliament when it handed over taxation powers to the European Union? 

The Exchequer Secretary to the Treasury (Mr David Gauke):  Mr Sheridan, it is a great pleasure to serve under your chairmanship this morning and to speak about the clause, which provides a certainty on the tax treatment of distributions in the form of transfer of assets and liabilities that is welcomed by companies. 

The changes ensure that transfers between UK resident companies can be treated as income distributions for the purposes of corporation tax. Such transactions are sometimes referred to as distributions in specie. Tax treatment will become aligned with that which usually applies when a non-UK resident company is involved in a transfer. We have also taken the opportunity to clarify distributions rules where they overlap in particular respects. 

The changes made by the clause will repeal legislation that prevents transfers of assets between UK resident companies from being treated as income distributions. Provided that such transactions otherwise fall within the scope of the distributions legislation, they will be treated as income distributions and will in most cases be exempt from corporation tax. The changes will also ensure that the confusing overlap in the scope of the two different definitions of the term “distribution” is removed. They will affect companies for which distribution treatment is currently given through HMRC guidance.

We do not expect any Exchequer impact, and hon. Members should note that the taxation press have welcomed the clause. 

I shall try to answer some of the questions asked by hon. Members. First, the measure affects only transfers between companies in the same group, so there will be no impact on dividends paid to shareholders, including trusts. Will there be any HMRC costs related to the provision and will HMRC have the capacity to deal with it? This is a simplification measure. There will be less of a burden on HMRC, because fewer clearances will be needed, so if anything, the provision will reduce the demand placed on it. On cost, there is no tax impact as such. Relief is currently available through guidance, but the clause makes it statutory. There are no implications related to distributions for non-UK companies. HMRC does not gather information on the number of transfers that will be affected by the measure, so it is not possible to provide an answer to that question. Finally, I am sorry to disappoint the hon. Member for Bassetlaw, but no EU implications relate to the measure. 

I hope that is helpful to the Committee. The clause will provide certainty on how corporation tax distributions legislation will apply to transfers of assets and liabilities between UK resident companies, and I hope that it will stand part of the Bill. 

Question put and agreed to.  

Clause 33 accordingly ordered to stand part of the Bill.  

Clause 34 

Annual exempt amount 

Catherine McKinnell (Newcastle upon Tyne North) (Lab):  I beg to move amendment 42, in clause 34, page 24, line 2, at end add— 

‘(8) The Chancellor of the Exchequer shall review the impact of this section on the number of taxpayers brought into Capital Gains Tax, and will lay a report of his review in the House of Commons Library.’.

The Chair:  With this it will be convenient to discuss clause stand part. 

Catherine McKinnell:  It is a pleasure to serve under your chairmanship, Mr Sheridan. 

Following the announcement in the 2011 autumn statement, clause 34 freezes the capital gains annual exempt amount—the AEA—at £10,600 for 2012-13, the same as for 2011-12. The AEA, similar to the personal allowance in the income tax system, is the amount of capital gain an individual can make before they have to pay capital gains tax. Clause 34 also requires that AEA rises in line with the consumer prices index, the CPI, instead of the retail prices index, from 2013-14 onwards. That was announced by the Government in the 2011 Budget. 

According to the tax information and impact note published at the time of the 2011 autumn statement, the measure is expected to yield £25 million in 2012-13, 2013-14, 2015-16 and £30 million in 2016-17. I want to address the issue of the move to the consumer prices index. The Government state that the CPI is the most appropriate measure of the general level of prices. However, the net effect of the Government’s decision to shift the indexation from RPI to CPI is essentially a stealth tax increase for millions of taxpayers. Is the

Minister satisfied that the public are adequately aware of the changes? Does he accept that an element of stealth could be perceived in the way in which the measure has been introduced? Seemingly small changes—the freezing of the AEA and linking increases to CPI rather than RPI—will have a bigger impact over time. With no indexation in the capital gains system now, a high inflationary environment could boost tax receipts simply through fiscal drag, where taxation increases automatically as taxpayers move into higher brackets due to inflation. 

Has the Minister undertaken an assessment of how many more people will be brought into capital gains tax because of the freeze and the slower growth in the AEA? Does the measure mean that more people will be brought into the self-assessment system and has the additional burden on HMRC been taken into account? If so, has the Minister assessed the cost of that? Does the Minister accept that, taken in isolation, these measures create fiscal drag and are therefore regressive? 

Our amendment asks the Chancellor to review the impact of this proposal on the number of taxpayers brought into capital gains tax and for a report of the review to be placed in the Library, and, therefore, I urge hon. Members to support it. 

John Mann:  I cite the arguments on fiscal drag put in the 1970s by Milton Friedman, Friedrich Hayek and Sir Keith Joseph. At the time they were quite successful in persuading the then leader of the Conservative party, one Margaret Hilda Thatcher, that fiscal drag was a particular problem. They put great effort and academic research into demonstrating that fiscal drag was one of the more dangerous tools of Government policy. Of course, they made the accusation against the then Chancellor Denis Healey and the previous one, James Callaghan. 

I have an open mind on those criticisms, but there seems to be some validity in suggesting that fiscal drag is a rather dishonourable form of Government policy, because the public cannot see it. Has it now become part of official economic policy of the Conservative party? Is it something that the Liberals have managed to negotiate into the coalition through their key impetus in Treasury matters—the Chief Secretary to the Treasury, the right hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander)? He may well be the person responsible for this. It would be useful to know. 

This is the last time today I will ask whether the European Union is restricting our rights to set taxation. It would be useful for the Government to put a box alongside each clause in the Bill that outlines where the EU is restricting our powers and when that was voted through Parliament. That would help clarify things, not least because a photo emerged yesterday of Margaret Hilda Thatcher campaigning for a yes vote in a rather natty blouse that comprised of the flags of all EU member states to be. 

9.15 am 

So, obviously this obsession with handing taxation powers to Europe is deep-rooted, beyond merely Edward Heath who initiated it. Perhaps the Minister could assist us, to save us asking the same question on each clause, because we all need to know whether Europe is

restricting our powers, although I am more interested in his analysis of his new policy of fiscal drag and what Sir Keith Joseph would think of it. 

Ian Swales (Redcar) (LD):  It is a pleasure to serve under your chairmanship, Mr Sheridan. It is also a pleasure to follow a fellow son of Leeds in speaking in this debate. 

I want to make a small input on the use of CPI and RPI. Those of us who have to defend our Government to our constituents do so with a certain amount of passion, obviously, when we need to do, but our efforts are stretched in this area because of the lack of consistency. The only thing that seems consistent is that we seem to apply CPI to everything that costs the Government money and RPI to everything where the opposite is the case. If members of the Committee do not believe me, they only need to look at annex A, “Indexation in the public finance forecast baseline”. One can see support for what I am saying in that list, with a huge range of things now having CPI applied, but the last 12 items on it still have RPI applied, including landfill tax, climate change levy, air passenger duty, tobacco duties, fuel duties, business rates, gaming duty and so on. Will the Minister give us a coherent statement on the use of inflation in public finances so that we can justify what the Government are doing and, in particular, try to kill the idea that fiscal drag, with CPI applied to items that cost money and RPI applied to items that bring in money, is a hidden policy underneath what we are doing? 

Mr Gauke:  Clause 34, as we have heard, makes changes to the procedure of indexing the capital gains tax annual exempt amount from the retail prices index to the consumer prices index from 6 April 2013. It also sets the annual exempt amount for 2012-13 at £10,600, keeping it at the same level as for 2011-12. 

The annual exempt amount, which sets the amount of capital gains an individual can make each year tax-free, is automatically indexed every year, unless Parliament sets a different figure. At Budget 2011, we announced that the CPI would be used as the default indexation assumption for the capital gains tax annual exempt amount in order more accurately to reflect the rate of inflation. That change reflects the Government’s intention to move the underlying indexation assumption for direct taxes from RPI to CPI in order to have a consistent measure of inflation across all policy areas. 

In autumn, we announced that the annual exempt amount would be set at £10,600 for 2012-13, the same level as for 2011-12. I understand that this change will affect some people near the threshold, but the reality is that tough decisions need to be taken on both tax and spending to tackle the budget deficit and ensure that everyone is paying their fair share of tax. The annual exempt amount, along with private residence relief, which exempts main homes from CGT, will continue to keep the vast majority of people from paying CGT altogether. 

I should also point out that the one-year freeze in the AEA enables us to afford the one-year CGT holiday for capital gains invested through the new seed enterprise investment scheme. SEIS opened for business in April and will encourage investment in new start-ups, which

are a vital source of future growth. The scheme offers income tax relief of 50% to investors on amounts invested up to £100,000, and includes a capital gains tax holiday for 12 months. Each eligible company will be able to receive an investment of up to £150,000. The scheme has been available since April 2012. 

In amendment 42, the Opposition ask for yet another report to be laid in the House of Commons Library, this time on the impact of setting the AEA at £10,600 in 2012-13. Information about the measure’s impact on the number of taxpayers brought into CGT has been published on the HMRC website in a tax information and impact note, to which the hon. Member for Newcastle upon Tyne North referred. HMRC will also be monitoring the impact of the measure, using information collected from annual tax returns. 

Only a relatively small number of individuals who have capital gains tax liability slightly above the AEA threshold will be directly affected. The Government believe that freezing the AEA is the right thing to do at a time of fiscal constraint. As I have said, keeping the AEA at this level means that the majority of people do not have any CGT to pay, while ensuring that substantial gains are taxed. 

The hon. Lady raised the issue of administrative burdens that may exist as a consequence. The AEA being lower than it would have been without a freeze could lead to around 60,000 more individual tax returns with a CGT liability being submitted between 2012-13 and 2015-16. However, the number of individuals affected is likely to be lower, as some individuals will have a CGT liability in more than one of those years, and some taxpayers will arrange their affairs so that the gains made in any one year will remain below the AEA. Administrative burdens on individuals are therefore likely to be small, and the impact will be further limited, given that a significant proportion of individuals affected are likely to be within the self-assessment system. The process of notifying capital gains using self-assessment is relatively straightforward, and HMRC has the necessary resources in place to provide guidance to those who need it. 

My hon. Friend the Member for Redcar mentioned CPI and RPI. We believe that CPI is the most effective measure for the impact of inflation. As my hon. Friend is aware, we inherited proposals relating to uprating of particular taxes that were based on RPI. We are in very difficult fiscal circumstances, as we all know, and a choice to depart from uprating by RPI would have a significant cost, which would have to be found from elsewhere. None the less, the move towards using CPI uprating for direct taxes is sensible. 

Another point, very much in the context of fiscal drag, is that perhaps the most significant threshold in the tax system is the size of the personal allowance, which we are increasing well above either CPI or RPI. The Government’s progress in the past two years on that front is one that hon. Members will welcome. 

Ian Swales:  I thank the Minister for his answer, and I do welcome the big uprating in the personal allowance. Will his Department give particular consideration to the uprating of business rates? All Members of the House have had a lot of pressure from businesses about the recent business rates increase, and a move from RPI to CPI on business rates would be highly welcomed across the business community. 

Mr Gauke:  I hear my hon. Friend’s point, and he is right to say that we have all received such representations. Moving from RPI to CPI would have a significant cost, and one also must look at the overall support that the Government provide to businesses in terms of, for example, the reductions in corporation tax and some of the other measures we have debated, such as the patent box and the fact that we have not increased employers’ national insurance contributions in the way that the Labour party had planned. We have done what we can to support businesses and will continue to do so. Decisions on business rates have to be looked at in that context. 

As far as whether such information is sufficiently available to the public or whether it is being concealed, it is perfectly clear that we have been straightforward in our announcements. It has not been hidden in the small print. We have been clear that we have moved from RPI to CPI. The fiscal implications of that have been clear on every scorecard produced at relevant fiscal events, so we have been clear on that. I repeat the point that we are in difficult financial circumstances and putting our public finances on a sustainable footing is a priority. In any event, we believe that CPI is a more accurate reflection of the rate of inflation. 

For those reasons, I hope that the hon. Member for Newcastle upon Tyne North will withdraw her amendment, and I hope that the clause will stand part of the Bill. 

Catherine McKinnell:  I thank the Minister for his comments in response to the contributions of hon. Members this morning, and he has provided an element of clarity for some of those specific queries. However, I noted the weariness with which he referred to yet another request for a report to be laid in the House of Commons Library. Once again, that raises some concerns about the level of transparency around these Government tax reforms. We have discussed the fiscal drag that will result from the uprating, the freezing and the change from RPI to CPI, and there is an element of stealth in that taxation that the public have a right to understand. While it may not be hidden in the small print, it is not necessarily evident at this stage exactly how many people will be affected. The Minister gave a rough estimate of 60,000 additional people falling within the capital gains assessment system. However, the figures given this morning do not give absolute clarity, and neither do they give clarity on the cost implications for HMRC. 

We accept that we face a serious issue with the economy in the current economic climate, but one of the biggest challenges is demand in the economy. Therefore, any increase in the uprating of the personal allowance, which has been discussed this morning, has unfortunately been completely undermined by the removal of tax credit support for working families and by the increase in VAT, which has taken money out of people’s pockets and demand out of the economy. For that reason, there needs to be transparency on the impact of these tax changes on households and personal incomes, and I urge hon. Members to support the amendment. 

Question put, That the amendment be made. 

The Committee divided: Ayes 13, Noes 17. 

Division No. 11 ]  

AYES

NOES

Question accordingly negatived.  

Clause 34 ordered to stand part of the Bill.  

9.30 am 

Catherine McKinnell:  On a point of order, Mr Sheridan, may I ask that we group our comments on clauses 35, 36 and 37 together today and also incorporate clause 215 which has already been grouped with clause 36? 

The Financial Secretary to the Treasury (Mr Mark Hoban):  The problem is that the clauses are allocated differently among Ministers. 

Catherine McKinnell:  With your permission, Mr Sheridan, I am happy to deal with them separately. 

Clause 35 

Foreign currency bank accounts 

Question proposed, That the clause stand part of the Bill. 

Catherine McKinnell:  Clause 35 relates to capital gains tax on withdrawals of money from foreign bank accounts. It is not uncommon for individuals resident in the UK to hold bank accounts in a foreign currency, perhaps because they have been paid in that currency, have sold an overseas asset or have specifically invested in a foreign currency. Normally, foreign bank accounts would be chargeable assets for the purpose of capital gains tax. However, under clause 35 gains made on withdrawals will not be liable to tax with effect from 6 April 2012. The measure is expected to decrease remits to the Exchequer by around £5 million a year. It is not expected to affect many individuals according to the impact note, only those who hold a foreign bank account. 

Although non-domiciles taxed on a remittance basis are likely to be more severely affected as they are likely to use more foreign bank accounts, the aim behind the clause is clearly to reduce the administrative burden. Calculating gains or losses on such bank accounts can be time consuming and complex. Moreover, over time capital gains and losses on such transactions tend to broadly balance each other out meaning that in many cases the administrative burden is disproportionate to the tax payable or losses allowable. It is, however, possible to envisage a situation where individuals choose to

make withdrawals from their account at particular times in order to secure large net gains which would now not be liable to tax. Has the Minister explored that risk? If so, what are his conclusions? 

Is it not the case that the measure could contribute to another form of tax avoidance. Another question relates to the losses that would otherwise be used to set against tax liabilities. Has the Treasury given any consideration to the potential impact on individuals who might be affected by this, particularly if they were to suffer significant unexpected losses with money held in a foreign bank account if there was, for example, an unexpected economic downturn? 

John Mann:  I was most surprised by the information my hon. Friend just provided. Perhaps she could help me by clarifying this. I have not been diligent enough in understanding the implications of this clause. Would the clause mean that if I kept money in euros, I might have a tax advantage over those keeping money in sterling, in some scenarios? Is that what is being proposed? 

Catherine McKinnell:  It is— 

Jacob Rees-Mogg (North East Somerset) (Con):  Mr Sheridan, may I say what a pleasure it is to serve under your chairmanship? 

May I give some financial advice to the hon. Member for Bassetlaw? If he has money in euros, he needs his head examined. 

Catherine McKinnell:  I am grateful for the interesting query from my hon. Friend the Member for Bassetlaw and the useful financial advice provided. I would be interested to know what assessment the Minister has made regarding potential gains and losses to the Exchequer from the changes. Have some of the more unexpected consequences of the proposed change been explored in more detail? 

Mr Gauke:  Clause 35 will simplify the capital gains tax rules on foreign currency bank accounts. It takes the gains and losses on bank accounts in a foreign currency out of a charge to tax. It will relieve people from a considerable administrative burden that, in many cases, is disproportionate to the amount of tax involved. 

Under the current capital gains tax rules, capital gains and losses can arise on bank accounts in any foreign currency. That is because CGT calculations must be done in sterling. Therefore, if someone holds a bank account in, say, euros, and the exchange rate between sterling and the euro moves up or down after money is paid into the account, the account holder will realise a gain or loss each time they make a withdrawal from the account. That means that people have to keep detailed records of each and every transaction on their foreign currency bank accounts. They must work out the sterling value of funds that they put into the account and the sterling value of funds that they take out of the account, and work out the gain or loss on each withdrawal. The burden of keeping such detailed records and working out gains and losses on each withdrawal is excessive, especially as gains or losses on small withdrawals are

likely to be trivial, and over time the gains and losses will tend to balance out. Existing rules may relieve people of that burden where the account is used for personal expenditure abroad. Also, HMRC allows people to adopt a simplified approach to their calculations in some instances. However, those relaxations do not always apply and offer only limited help. 

Clause 35 will remove the excessive burdens by taking foreign currency bank accounts out of the scope of CGT for individuals, trustees and personal representatives. That will mean that they will not need to calculate capital gains and losses on the withdrawals made from such accounts on or after 6 April 2012. 

The change was included in last year’s consultation on the taxation of non-domiciled individuals. Non-domiciles are more likely than most people to hold bank accounts in a foreign currency and to face the burdens the current rules impose. However, the new exemption applies to all individuals, whether UK domiciled or not. Following consultation, we are extending the exemption to trustees and personal representatives of deceased persons. 

The hon. Member for Newcastle upon Tyne North asked whether the proposal would open up an opportunity for avoidance and whether a loophole would be created. The answer is no, because there are existing safeguards in CGT rules that prevent abuse, for instance by stopping relief for artificial losses. Other types of currency assets, such as currency futures or options, are not eligible for the exemption. 

I reassure the hon. Member for Bassetlaw that there are no tax advantages in holding euros; he can rest easy on that point. No CGT is due on bank accounts in sterling, and the measure will apply the same rules consistently to other currencies. 

With that clarification, I hope that the Committee will be satisfied with the clause, which has been widely welcomed. It is worth pointing out that Deloitte has said that the clause will remove 

“a frankly impossible compliance burden from unrepresented taxpayers”, 

and the Chartered Institute of Taxation regards the clause as 

“a victory for common sense”. 

I hope that the clause will stand part of the Bill. 

Question put and agreed to.  

Clause 35 ordered to stand part of the Bill.  

Clause 36 

Collective investment schemes: chargeable gains 

Question proposed, That the clause stand part of the Bill. 

Catherine McKinnell:  Clause 36 deals with collective investment schemes. In the 2011 Budget the Chancellor announced his intention to legislate to authorise tax transparent collective investment schemes to be constituted by the contractual arrangements under the UCITS IV directive. According to the impact note: 

“The policy objective is to ensure that the UK can compete as a fund domicile for tax transparent funds.” 

In other words, the measure is designed to ensure that the UK remains competitive in the asset management market alongside other European jurisdictions such as Luxembourg and Ireland. The move has, not surprisingly, been strongly supported by the Investment Management Association, which represents the asset management

industry in the UK. Clause 36 provides powers for the appropriate taxation for capital gains made by UK investors on assets held in such collective investment schemes, and it empowers the Treasury to define in regulations the types of scheme that will be affected. 

One concern is that the structure of those schemes will not have been determined at that stage, so the clause will grant a power to define in regulations something that the Government have not yet outlined. I would be grateful for the Minister’s comments on that. The impact note states: 

“This measure is expected to have a negligible impact on the Exchequer”, 

but if such gains are deemed not to be chargeable under the new legislation, how much revenue will the Treasury forgo by implementing the rules? As I have mentioned, the introduction of the tax transparent fund is designed to attract business to the UK. On whom will the changes have the most impact, and can the Minister provide the Committee with any figures on that matter from the consultations that have been carried out? Has the Treasury considered the potential for abuse of the rules, and can the Minister reassure the Committee about that? What anti-avoidance measures will the rules include? 

I understand that clause 215 will be considered in conjunction with clause 36. Clause 215 fulfils a consequent requirement to allow the Treasury to provide, through regulations, an exemption or relief from stamp duty or stamp duty reserve tax for transactions related to collective investment schemes. I have no queries about that. 

Mr Hoban:  As the hon. Lady rightly pointed out, clause 36 and clause 215 fit together, and they facilitate the launch of tax transparent funds in the UK. As she pointed out, they are important to the long-term health of the fund management industry in the UK, which is the largest asset management sector in Europe. Other jurisdictions have tax transparent funds, which are attractive to investors, and the UK fund management sector is at a disadvantage as a consequence. The Government have sought to ensure that London remains competitive as a global financial centre. We identified when we came into office that this was one area where we needed to make further progress, so we have worked closely with the fund management sector on that. The hon. Lady is right that there are still issues outstanding about the nature of some of the vehicles that could take advantage of the scheme. 

There are two types of authorised tax transparent funds, both of which are contractual funds under the UCITS IV directive. One type is the co-ownership fund, which is a new type of fund structure in the UK but which is already in place and used extensively in other European member states. We are also considering the introduction of an authorised limited partnership fund, which will be based on the already well recognised unauthorised limited partnership vehicle currently used in the UK, with fully transparent income and gains. Given the availability of such funds in other domiciles, there is a commercial demand for a similar vehicle in the UK, and we anticipate that they will be available for use later this year. Once introduced, the tax transparent funds will enable UK fund managers to take advantage of the opportunities created by UCITS IV and establish master funds here in the UK. 

9.45 am 

The hon. Lady asked about the cost to the Exchequer. The tax transparent funds move the point of taxation from the funds to the investor, so it is not a case of there being no tax, but the point of taxation has been moved. 

The hon. Lady also asked about the regulations, and her question reflects the uncertainty of the structure. The Treasury and the FSA have consulted widely on tax transparent funds, and they are considering the responses. The tax regulations will depend on the overall regulatory structure of the tax transparent funds, which is still being finalised in the light of the consultation. The tax regulations that provide the powers will be subject to approval by the House once the regulatory structure has been finalised. 

There is a close link between the regulation and taxation of the funds. Under the previous Government, a tax regime was built up to assist the fund management industry, but the regulatory structure did not quite work for the investors, which is why we are trying to develop the regulatory structure in tandem with the FSA at the same time as developing the tax rules. We want not only a taxation structure that works for the funds, but a regulatory structure that works, too. 

Question put and agreed to.  

Clause 36 accordingly ordered to stand part of the Bill.  

Clause 215 ordered to stand part of the Bill.  

Clause 37 

Roll-over relief 

Question proposed, That the clause stand part of the Bill. 

Catherine McKinnell:  I am sure the ears of my hon. Friend the Member for Bassetlaw will be pricked when he hears that clause 37 preserves the availability of roll-over relief on entitlements under the European Union single payment scheme. Roll-over relief allows businesses to defer capital gains tax when proceeds from the disposal of chargeable assets are reinvested in new-qualifying chargeable assets. The Government have stated that the relief will help businesses to expand, develop and modernise by encouraging reinvestment in new assets. 

The EU introduced the single payment scheme, which is its principal agricultural subsidy scheme. Payments under the SPS were once eligible for capital gains tax roll-over relief, but a new SPS directive has changed that. SPS payments, as defined in the original 2003 EU directive, no longer qualify for roll-over relief. The effect is that disposals and acquisitions of entitlements do not qualify for roll-over relief, so my understanding is that clause 37 amends the class of qualifying assets to include SPS entitlements and will allow for future changes to relevant classes of assets and roll-over relief to be made by secondary legislation. 

The provisions of clause 37 will be retrospective and have effect on or after 1 January 2009, which is when the EU directive that excluded roll-over relief from SPS entitlements took effect. The impact assessment states that the measure is expected to have a negligible impact on Exchequer revenues. There are 7,000 transfers of entitlement to payments under SPS a year, however,

and the impact assessment states that the measure is not expected to have any impact on the numbers, the amounts or the costs of claims. One question has been raised: will the measure cause any issues with EU legislation, and will any approvals need to be sought? If so, has that been completed? Will the Minister confirm that there will be no additional costs or claims, as stated by the impact assessment? 

Mr Gauke:  As we have heard, clause 37 preserves the ability of farmers to defer tax in relation to the transfer of rights to single payment scheme payments following administrative changes to the EU scheme. It also provides that similar routine changes can in future be implemented outside of a Finance Bill. The revisions in the measure will be retrospective and have effect from on or after 1 January 2009. 

By way of background, where a business realises gains on the disposal of certain types of business assets and reinvests the proceeds in new business assets, tax on those gains can be deferred or rolled over until the disposal of the new asset. Rights to payments under the single payment scheme—the principal agricultural subsidy scheme in the European Union—have been among the assets that qualify for such relief, but the EU directive under which single payment scheme payments are made was republished and renumbered in 2009. As a result, the roll-over relief provisions need amending to ensure that relief continues to be available in relation to rights to payment under the scheme. 

The clause does two things. First, it restores the availability of roll-over relief for farmers by ensuring that relief is available whether rights arise under the old directive or the new one. Secondly, where future legislative change is needed to preserve the availability of roll-over relief, it provides that such changes can be effected through secondary legislation. That power can be used only to the advantage of taxpayers. It cannot be used to narrow the scope of relief. I stress that the measure preserves the existing treatment and that no costs are incurred as a consequence of the changes. I am pleased to reassure the hon. Member for Newcastle upon Tyne North that there are no EU implications or requirements in that respect. 

In conclusion, the clause preserves the ability of farmers to acquire and dispose of rights to single payment scheme payments without incurring an immediate tax charge and makes sensible provision for legislating further changes of this sort. I hope that the clause will stand part of the Bill. 

Question put and agreed to.  

Clause 37 accordingly ordered to stand part of the Bill.  

Clause 38 

Seed enterprise investment scheme 

Question proposed, That the clause stand part of the Bill. 

The Chair:  With this it will be convenient to discuss the following: 

Government amendments 148 to 156. 

That schedule 6 be the Sixth schedule to the Bill. 

Rachel Reeves:  The clause deals with the seed enterprise investment scheme, which is a tax-advantaged venture-capital scheme designed to incentivise investment in small, early stage companies, with a focus on those companies carrying on a new business in a qualifying trade. The scheme attracts income tax relief at 50% and an exemption from capital gains tax, which also applies to some roll-over investments. As a result, the cost to the Exchequer will be high, but will gradually fall from £50 million to £20 million per annum. The policy is designed to support growth by helping to attract investment in smaller, riskier early-stage UK companies. It is specifically limited to businesses raising up to £150,000, for companies who have not benefitted from EIS or VCT investors, and who employ 25 or fewer employees and have gross assets of under £200,000. This is of course an important priority, and hon. Members will be keen to support local businesses, ensuring that they receive the capital that they need in these difficult economic times, especially as the project Merlin agreement has failed to get bank lending going. 

As we have discussed, the Bank of England figures from May show that net lending to businesses has fallen, year on year, in every single month since May 2010. It is welcome to see some concrete action on small-business lending, but I would like to hear from the Minister about the expected outcomes. The policy was of course designed some time ago as it is the result of a consultation made in Budget 2011. As I am sure that hon. Members are aware, the economic forecast in Budget 2011 varied from that in Budget 2012. Have the expectations of the costs to the Exchequer been revised in the light of those changes and in the light of the recent confirmation that we are back in recession? Will the Minister enlighten the Committee on the anticipated level of take-up for the schemes over the remaining years of this Parliament? 

How will small businesses attract this form of finance? Although seed investors may know tax regulations like the back of their hand, that might not apply to the small businesses that we hope will benefit from such investment. The Institute of Chartered Accountants in England and Wales has raised concerns about the complexity of the seed enterprise investment scheme. In relation to the guidance from Her Majesty’s Revenue and Customs, the ICAEW has stated that 

“this is no substitute for well written legislation in the first place.” 

It is also 

“concerned that companies which are supposed to benefit from it will not seek the necessary professional advice”— 

both accountancy and legal advice— 

“needed to implement SEIS because they fear that the cost will be disproportionate to the amount of money which can be raised under the scheme.” 

That is a fair concern. 

What is the Minister doing to ensure that small businesses know about the steps they must go through? Are any advertising campaigns or measures being considered to enhance take-up? Has he consulted other Departments about what steps could be taken to advertise the scheme and to ensure that businesses know about it? Will the Government’s local enterprise schemes play a role in advertising the scheme and making businesses aware of it? I am sure that the Minister shares our commitment to ensuring that businesses throughout the

country can develop and grow and can benefit from the scheme. If the Minister answers those important questions positively, that will ensure that the scheme is as successful as possible. 

John Mann:  I am minded to support this clause, but I have a question for the Minister. Support for businesses, especially new and small ones, is vital across the country. Ministers are happy to talk about interest rates in terms of gilts and base rates, but last week it was revealed that real interest rates for business in this country are the highest in the European Union. When I raised that in Committee earlier, there were surprised looks on the faces of Government Members, who are regularly informed about how low our interest rates are, but that relates not to the base rate of the Bank of England, but to the interest rate that businesses have to pay. 

There are two problems with project Merlin: first, of course, there is the problem about the availability of finance to businesses; and secondly, alongside that, there is the bigger problem of the cost. Businesses tell me, and this has now come out in official statistics for the first time, that the cost is very high. They are paying phenomenally high interest rates. We now have evidence from the OECD and the European Union that compares real business lending rates—actual rather than notional rates—charged by financial institutions to businesses. It shows that we have the highest interest rates for businesses borrowing money of any EU country. We are several points higher than Germany. We are higher than France, and we are even higher than the problematic countries on the periphery of Europe, which have other financial problems. 

Why is that the case? Why are British businesses being charged more? Why do we have the highest real interest rates for businesses in the European Union? Crucially, what is the Minister doing about that? Do the proposals in the clause and other Government’s proposals for business have any significance, given the real lending cost to business and the fact that the economic crisis and the Government’s incompetence in economic affairs have pushed our interest rates higher than those of Germany, France and other countries in the EU? 

Grahame M. Morris (Easington) (Lab):  On a point of order, Mr Chairman. Will you clarify that we are debating clause stand part? 

The Chair:  Yes. 

10 am 

Grahame M. Morris:  Thank you. It is a pleasure to serve under your chairmanship, Mr Sheridan, come rain or shine. I am grateful to have the opportunity to explore a couple of points on what I think is quite an important clause. 

As my hon. Friends the Members for Bassetlaw and for Leeds West have indicated, the clause is one of a number of measures in the Bill designed to encourage investment in small businesses, and the Opposition welcome that. Indeed, the seed enterprise investment scheme is one such way to help small businesses that the Chancellor envisaged in his Budget. 

As we have already heard, the scheme applies only to start-up businesses with 25 or fewer employees holding assets of up to £200,000. As I understand it, the companies must be genuinely new ventures, just at the point of

getting up and running. According to the explanatory notes, investors may obtain up to 30% of shares in the start-ups and gain a significant tax relief on their investment. In the first year of the scheme, investors will also be eligible for a capital gains tax break on the shares, as well as on any gains reinvested from assets in 2012-13. 

The scheme is certainly a shake-up of the incentives on offer for investors in small businesses. It clearly seeks to encourage more investors to put their money into small businesses—up to £100,000 in a single tax year or £150,000 over two or more tax years into a single UK company. Interestingly, I understand—again, from the explanatory notes—that eligible companies must trade in an approved sector. Will the Minister elaborate on precisely what an approved sector would be? Have the appropriate sectors been drawn up yet, and will they specifically exclude finance and investment companies, as has been suggested by some media commentators? 

The scheme went live in April this year. What data does the Minister have on the take-up so far, and when will we be able to see the figures? I know that Government Members throw their hands up in horror when we ask to see data or for reports to be published and placed in the Library, but I am sure the Government collect the data anyway—it would be prudent of them to do so—and, frankly, I cannot understand why it should be such an onerous task to publish the data, given that it is in everyone’s interest to scrutinise how particular measures are working. 

Will the Minister ensure that any data on businesses benefiting from the seed enterprise investment scheme are presented in such a way that we can see the regional impacts and assess their effectiveness in regional economies? Business investment is a key element in the recovery of the UK economy. The Opposition are keen to encourage jobs and growth, which we have not seen a great deal of in my region over the past two years. Indeed, the north-east, like the rest of the UK, has seen plummeting business investment, compounded by Government investment in infrastructure and capital being pulled away in the same period. 

Small businesses in my region, and perhaps in other regions, have been calling for targeted help, better capital allowances and better business support from the Government and the banks, as well as better public investment in the surrounding infrastructure, as was the norm under the previous Labour government. I am sceptical of the ability of the scheme to help start-ups, especially in my region of the north-east, and to attract investment, simply because the problem we face in the north-east economy, perhaps more so than elsewhere, is a complete lack of demand—demand is flat. We need specific measures to stimulate demand. 

The measures we have seen so far, embodied in the clause, show a lack of understanding of the distinct problems that we face in the north-east. They will do little to offset losses, such as our regional development agency money over the past two years. Jobs and growth have been hard-hit in the north-east, not just because of the lack of business investment but because of the colossal amounts of money that have been sucked out of the north-east economy over the past two years. We have heard hon. Members refer to the figures, our region has lost two thirds of our regional development funding. As I have mentioned previously, changes to the welfare benefit system will remove £170 million from

our regional economy. Hundreds of millions are being cut from local authority budgets—£67 million in the first year alone from my local authority, Durham county council. Clearly, the private sector-led recovery that we were promised by the Chancellor has not materialised to any great extent in the north-east, and certainly not enough to offset the considerable job losses in the public sector. 

Graeme Morrice (Livingston) (Lab):  My hon. Friend accurately describes the failure in his region of the UK Government regional growth policy. Of course, the UK Government regional growth policy applies only south of the border. Is he aware of the equal failure of the Scottish National party Government when it comes to lack of stimulation of growth and economic demand, capital project expenditure and job creation in Scotland? 

Grahame M. Morris:  A basic problem is that this measure is essentially a supply-side solution when the problem we face is fundamentally one of demand, and, as I said, I wish to return to that subject. However, we are dealing with the proposal in clause 38 regarding the seed enterprise investment scheme, which is essentially a supply-side measure. 

My concern is that no amount of rich investors in small businesses will conjure up the necessary consumers and create demand in an area such as mine. People simply do not have the money to spend. The Nobel prize-winning economist Paul Krugman, who had a bit of airtime recently on the BBC and in the national press, says: 

“The urge to declare our unemployment problem ‘structural’—a supply-side problem of some kind, not solvable by the ‘simplistic Keynesian’ notion of just increasing demand—has been quite something to behold. It’s rapidly entering the category of a zombie idea, which just keeps shambling forward no matter how many times it has been killed.” 

He also applies that argument to the UK economy as a whole. Professor Krugman cited evidence from the United States showing that the overwhelming factor holding businesses back is “lack of sales”—in other words, there is not enough demand in the economy. Next to that, restraints on capital are not really an issue—certainly not of the same order of magnitude—and not having enough skilled workers is no more of a problem now than it was two years ago, before the global recession hit. Government Members often raise concerns about regulations and red tape. Businesses certainly complain about red tape, but I would say no more than usual. What has changed over the past two years is that there is no demand. That is what Professor Krugman said in an interesting interview on “Newsnight” on 30 May. In The New York Times, he wrote: 

“Britain…is suffering much more than acknowledged from a lack of effective demand—and also has a much smaller underlying budget problem than the government claims”— 

this is from a Nobel prize-winning economist. 

“The British may be poor-mouthing their economy—and in so doing creating a self-fulfilling prophecy, in which excessive pessimism about potential leads to policies that in fact impoverish the nation.” 

In my mind, no one has put it any better. 

To conclude, I urge the Minister to reassure me that we will be able to determine the regional effects of the seed enterprise investment scheme. If it is shown that the benefits are skewed towards the south-east and London, will he indicate what sort of response we can expect from the Chancellor? 

The Chair:  In response to the hon. Gentleman’s opening comments, and those of the hon. Member for Bassetlaw, I have been called many things in my political lifetime, but a ray of sunshine is certainly a new one. I am sure that that is not the case for Mr Ian Mearns. 

Ian Mearns (Gateshead) (Lab):  I beg to differ, Mr Sheridan. I always regard your company as being like a ray of sunshine. You should have a better opinion of yourself, sir. 

I intend to focus on the importance, particularly in a regional economy such as the north-east’s, of beginning, nurturing and growing small and medium-sized enterprises. I think it important also to point out that, following the demise of the regional development agencies across England, local enterprise partnerships and the regional growth fund are, unfortunately, barely scratching the surface of what we need to do to stimulate and grow our economy and business base. 

It may surprise Members to learn that in a place such as Gateshead, largest private sector employer employs fewer than 1,000 people. Twenty-five or 30 years ago, many of the large industrial heavy engineering enterprises on the banks of the River Tyne employed several thousand people, and even as many as 10,000, but we are not in that game any more. In Gateshead, there were such large industrial manufacturing employers as Northern Engineering Industries and Clarke Chapman. The largest private sector employer now is AkzoNobel, which is known locally as Nobel International Paint and is an excellent manufacturer of marine, yacht and protective coatings. 

Gateshead is on the south bank of the River Tyne, and has a deep, rich industrial heritage involving the railways, mine-working, and mine-working engineering, but it now has a much more diverse economy. It has the A1 running through it and the north-south east coast main line. It is the home of the Angel of the North and so much more, but in itself, Gateshead is an important employment hub for the whole north-east. People do not realise that in the borough of Gateshead, over 100,000 people are employed, but most people who are not in the public sector are in small and medium-sized enterprises. The Team Valley trading estate, which is an important employment hub and probably in the top five purpose-built industrial estates anywhere in the country, has more than 25,000 employees in its environs, mostly in the SME sector. 100,000 people are employed in the borough, as I have said. 

Why do we need investment incentives for small and medium-sized enterprises, when British industry and commerce is sitting on £0.75 trillion, in terms of investing capacity, but is not investing? The real question that we have to pose to the Government is how we stimulate demand. It is quite clear that investors will not invest because of the lack of demand in the domestic economy. That is exacerbated in north-east England because of the massively different impact of the cuts imposed by central Government. 

10.15 am 

The private sector in the north-east does not have the capacity to pick up the burden of public sector job losses, which now, sadly, number well over 30,000 in the region. That was the last figure I saw from midway through last year, and the overall number of job losses in the public sector is probably closer to 50,000 by now. Public sector job losses have been mirrored in the private sector by more than 10,000 job losses in construction, and more than 10,000 job losses in manufacturing. 

The private sector is not picking up as we were promised. It is being impacted by the cudgelling of public sector jobs, which is depressing demand. There is a particular impact on small businesses; they rely on local spending power and disposable income, which are further diminishing due to more cuts in public services, jobs, and benefits among the large sectors of the population that rely on them. 

Geography is also important. North-east England is one of the peripheral regions of the UK and English economies. The geography means that to get goods and services to markets, there are increased costs, including fuel costs. It also means a new political reality, in that we have Scotland just over the border. I agree with my hon. Friend the Member for Livingston that the Scottish National party is possibly not doing as much as it should to stimulate the Scottish economy, but it is doing more in Scotland than the Government are doing in the regions of England. Scotland still has a tourism strategy and still spends money trying to attract visitors to Scotland. I am afraid to say that the good “Passionate People, Passionate Places” advertising regime that we had to stimulate tourism in north-east England has dried up—it has gone. Sadly, just north of the border, 50 or 60 miles away from where I live, the Scots are still spending money in great measure on employing a tourism strategy. 

Scotland is also able to attract other advantages. Inward investment incentives in Scotland have resulted in businesses such as Amazon, which looked at potential sites in north-east England, locating in Scotland. That decision was based only on the fact that there were inward investment incentives. Our transport infrastructure is teetering on the brink. All that is important in attracting inward investment and growing the economy in regions such as north-east England. That cannot be ignored by Government Members. 

John Mann:  On a point of order, Mr Sheridan. I note that there is to be a statement on banking reform in the Chamber. The business appears to have been timetabled by the Government this morning. That statement will clash with the Committee’s sitting this afternoon. There is to be an urgent question on fishing discards, followed by a business statement and the statement on banking reform. My calculation is that there will be a straight overlap with this Committee’s sitting. If that is the case, that seems rather disappointing, from the point of view of the Government’s business managers. 

The Chair:  That is a perfectly valid point. At the end of the day, it is up to the Government to make the time available. I am sure that your concerns have been heard, Mr Mann. 

Mr Gauke:  I am sorry that you, Mr Sheridan, have never been compared to a ray of sunshine in the past, and I am glad that that has been put right today. I am reminded of the quote from P.G. Wodehouse, who said: 

“It is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine.” 

I have never seen you as someone with a grievance, Mr Sheridan. P.G. Wodehouse, of course, never served in government with the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). How apposite those remarks may have been. 

Clause 38 introduces schedule 6, which establishes the new seed enterprise and investment scheme, known as SEIS. The new scheme will encourage investment in new early-stage companies by providing 50% income tax relief for individuals who invest in shares in qualifying seed companies. The clause also introduces a capital gains tax holiday on gains realised on the disposal of assets in 2012-13 that were invested in the same year. Shares qualifying for SEIS income tax relief will be exempt from capital gains tax. The Government recognise that market failure, leading to an under-supply of risk capital, is particularly acute at the seed level of investment. The smallest companies, especially start-ups, face particular difficulties attracting investors to make early-stage investments. 

At Budget 2011, the Government announced that they would consult on providing new support for seed investment in response to the difficulties that start-up companies can face in seed finance, including options for a new scheme. Following consultation over the summer, we announced in the autumn statement the introduction of the SEIS and the CGT holiday for investments made in the new scheme. The new scheme is designed to increase the amount of equity investment available to smaller companies. The relief is claimed by investors, rather than by the investee companies. There is therefore unlikely to be any extra administrative burden on companies. The SEIS is expected to benefit businesses in all regions, assuming a similar distribution to that of the enterprise investment scheme, the data for which are published in table 8.4 on the website of Her Majesty’s Revenue and Customs. 

I will just pick up on the point raised about the regional impact, because there could be a concern that EIS is too focused on London and the south-east. It is worth pointing out that the national statistics are based on the location of the registered office of the company issuing EIS shares, but that is not necessarily where the money raised by the share issues is used. The location of the registered office does not necessarily reflect where the company actually carries on its trade. For example, it is common for a company’s registered office address to be care of an agent or a lawyer, while a factory is located somewhere else. It is also worth pointing out that the SEIS provides additional support to encourage business angels, who are spread throughout the United Kingdom. They tend to invest locally, so we hope that take-up will be spread across the UK, and, although it is still early days, inquiries so far suggest that that will be so. 

It is estimated that an extra 300 or more companies will benefit from investment under the Government’s tax relief schemes in the first year as a result of the SEIS. The scheme is designed to be simple and easy to use. The rules are aligned as far as possible with those

for the existing enterprise investment scheme to allow companies to use both schemes sequentially without needing to become familiar with two sets of rules. I appreciate the point made about complexity, but the measure will provide a generous tax relief, and the scheme needs some rules to prevent abuse. Where possible, it duplicates the already familiar EIS rules, as we envisage that many companies will raise money under both schemes in sequence. As I say, it will be easier not to have to learn two different sets of rules. 

Amendments 148 to 156 concern the anti-abuse provisions. Following recent discussions with industry specialists, an amendment is required to the anti-abuse provision in schedule 6 to ensure that it is effectively targeted. Similar amendments are required to the anti-abuse

provisions in schedules 7 and 8. The legislation is intended to prevent two types of abuse. First, it will prevent arrangements where the aim is to deliver to investors a tax mitigation product with no other commercial purpose. Secondly, it targets arrangements that aim to provide the benefit of tax advantage investment to entities or projects that do not themselves qualify under the schemes, or whose owners want the benefit of cheap financing without relinquishing equity. These amendments will ensure that the legislation targets the abuses effectively without inadvertently preventing legitimate use of the venture capital schemes. 

10.25 am 

The Chair adjourned the Committee without Question put (Standing Order No. 88).  

Adjourned till this day at One o’clock.