TaxPersonal TaxFinance Bill – ‘Innocent’ funds hit by clampdown

Finance Bill - 'Innocent' funds hit by clampdown

The government's tax avoidance amendment to a clause in the Finance Bill has sparked criticism from financial markets, claiming it was inappropriately drafted.

Treasury ministers have been accused of unsettling financial markets by mishandling a crackdown on tax avoidance, involving the early redemption of discounted securities.

The charge followed the publication of draft government amendments to the Finance Bill, preventing the device that would unintentionally penalise ‘innocent’ investment trust, unit trust and insurance funds.

Tory MP Nick St Aubyn said further changes could have been avoided if the industry had been consulted. He told MPs: ‘The uncertainty created by the inappropriate drafting of clauses does no credit to the government or the standing of the City of London.’

St Aubyn said action against the abuse was signaled on 15 February by press release, before the Budget, and there had been ‘plenty of time to consult with the industry on the proper phrasing of the clause’.

But financial secretary Barbara Roche said the crackdown had to be imposed to prevent further avoidance. ‘As the clause is an anti-avoidance measure, and substantial amounts of taxpayers’ money are at stake, it would be inappropriate to issue a draft for consultation before the measure came into effect,’ she said.

Roche also said the parties most concerned were specialists able ‘to study the proposals in great detail in a short time’.

Tory accountant MP Nick Gibb demanded to know why it had taken so long to publish the amendments and Roche admitted: ‘Under the clause, it’s possible that innocent provisions for early redemption could lead to the security being classified as a deep discounted security provision.’

The amendments would prevent the clause applying where redemptions were not at the holder’s option or the result of ‘an unlikely event’ that would adversely effect the holder if there were no redemption.

Roche said the crackdown would still apply where the holder and issuer were connected, or where tax avoidance was involved.

Related Articles

LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

3d Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

2w Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

4m Alia Shoaib, Reporter
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

4m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

5m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

5m Alia Shoaib, Reporter