Chancellor Gordon Brown is pressing ahead with his tax avoidance crackdown in the second half of the finance bill, which was put before Parliament yesterday. He is resurrecting measures postponed in the rush to the general election, with a handful of minor concessions to critics.
The Finance Bill 2005, contains all the clauses introduced in the original finance bill that followed the spring Budget, but which had to be omitted from the bill rushed through in the dying days of the last Parliament because the Tories insisted there must be more debate.
Paymaster General Dawn Primarolo said the measures in the original Bill ‘are essential for an effective, principled, targeted and fair tax system that maintains the UK’s competitiveness but acts where there is a loss to the Exchequer.’
But it also contains a new clause and schedule that make amendments to the International Accounting Standards measures in the Act that was passed just before Parliament was prorogued. These come in response to representations that the provision was inhibiting genuine commercial restructuring, and appear alongside a number of other technical amendments.
The Treasury claimed that a series of minor changes to the postponed clauses meet the genuine concerns of business that some clauses in the original legislation were so widely drawn that they would catch genuine transactions as well as tax avoidance ploys.
Notes to the new Bill make it clear on tax arbitrage that companies will be allowed to amend returns to adjust the amount of deduction claimed, including proposals to extend the ‘grandfather period’ giving transitional protection to some companies up to 31 August.
The new legislation contains changes intended to ensure that the crackdown on artificial financial arrangements that avoid or minimise liabilities does not affect routine arrangements concerning preference shares and other common corporate structures not set up for the purpose of tax avoidance. It will also contain powers to make regulations intended to be only exercisable prospectively, ruling out retrospection – though whether that is the overall effect will be a matter of argument.
A regulation-making power allowing the Treasury to amend a number of life insurance Company Act provisions relating to the apportionment of income and gains has been time-limited.
And there are a series of alterations to the stamp duty tax to make sure it works as intended for home reversion plans, for loans and deposit schemes while ensuring group-relief clawback cannot be avoided by the use of leases.
And the legislation has been extended to ensure that the UK intangible assets regime is fully compliant with the EU Mergers Directive.
The bill’s second reading – a debate on approval in principle – is due next Tuesday (2 June), with a start on the committee stage on 13 June.
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