Primarolo rules out clearance for capital loss schemes

Paymaster general Dawn Primarolo has flatly refused to set up a statutory
clearance procedure for transactions involving capital losses – but offered
companies considering controlled foreign company arrangements an informal
‘clarification’ arrangement.

Speaking during debates on the finance bill, she said no clearance procedure
was necessary to enable companies to deal with allowable losses, because
companies would know when they were entering into anti-avoidance areas.

She said the principle behind a series of anti-avoidance measures was that
companies should be able to claim and use capital losses only where there was
both a genuine economic loss and a genuine commercial disposal.

She believed allowing advisers to design tax avoidance schemes and then seek
clearance for them ‘is simply unattractive, to put it mildly’.

The informal ‘clarification’ arrangement concerned the application of the
controlled foreign company rules in the light of European Court of Justice
proceedings in which the advocate-general has given an opinion in the case
involving Cadbury-Schweppes.

Primarolo said the advocate-general had given his opinion that CFC rules are
compatible with European Treaty obligations and not an unacceptable burden on
companies, but she made it clear this was only an opinion and it was unwise to
go further until there was a judgement.

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