HC Deb 11 July 1984 vol 63 cc1325-7

Amendment proposed, No. 169, in page 192, line 24, after 'and', insert `subject to sub-paragraph (7A) below'.—[Mr. Ian Stewart.]

Mr. Speaker

With this we may discuss also the following Government amendments Nos. 170 to 172.

Amendment No. 173, in page 193, line 30, at end insert— '(7A) This sub-paragraph applies where—

  1. (a) at any time in the accounting period in question the issued shares of the controlled foreign company are of more than one class, and
  2. (b) at the end of that accounting period persons resident outside the United Kingdom have interests in the company, and
  3. (c) sub-paragraph (5) above does not apply and in a case where this sub-paragraph applies the appropriate portion of the profits referred to in sub-paragraph (1)(c) above is that portion which it is just and reasonable to attribute to the interests in the company of persons resident in the United Kingdom at the end of that accounting period'.

Sir William Clark

I should like to ask my hon. Friend for confirmation that discussions are going on with interested parties about controlled foreign companies. I hope he will assure me that discussions are continuing. There is growing concern that this rushed legislation on controlled foreign companies could affect our export potential. It is vital that the talks should continue. I understand that they are taking place, but perhaps my hon. Friend will confirm that.

Mr:. Ian Stewart

I have had extensive consultations with representative bodies and other interested parties on the legislation, as I undertook to do between the Committee stage and Report. I compliment my hon. Friend the Member for Croydon, South (Sir W. Clark) and my hon. Friends the Members for Beaconsfield (Mr. Smith) and for Lewisham, West (Mr. Maples) on the constructive parts that they have played.

The Amendment Paper contains a number of amendments relating to the control of foreign companies. They do not change the import of the legislation, but clarify it in several cases where it was not regarded as entirely clear.

We have introduced an extra door, a way in which a company can be excluded from legislation, in amendments Nos. 179 and 180, if it is quoted on a recognised stock exchange. We have widened the door for the acceptable distribution test in amendments Nos. 169 to 172. We have improved the exempt activities test with amendments Nos. 119, 120 and 121. Those are important clarifications. The legislation will retain its full impact in the way that the Government intended, but will not prove needlessly onerous in genuine and bona fide cases. I am able to give my hon. Friend the asssurance that he wishes.

Sir William Clark

I am sorry, but I did not quite understand my hon. Friend. The assurance that I asked for was that discussions with interested parties were continuing

Mr:. Stewart

Discussions had to be completed before the Report stage, in time to introduce the amendments before the House. They reflect our full discussions. With legislation as complicated as this, which it must be to fulfil the primary purpose and at the same time be fair and not unduly onerous to the business community, there are likely to be cases where certain matters may need to be considered to see how the legislation works in practice. I shall be only too pleased to consider with the representative bodies and any others any points of practical difficulty which may arise after this stage. I hope that my hon. Friend will not hesitate to draw to my attention any cases of that kind of which he is aware.

Amendment agreed to .

No. 170, in page 193, line 11 after 'is', insert `subject to sub-paragraph (7A) below'.

No. 171, in page 193, line 18 after 'is', insert `subject to sub-paragraph (7A) below'.

No.172, in page 193, line 30 at end insert— '(7A) In any case where the immediate interests held by persons resident in the United Kingdom who have indirect interests in a controlled foreign company at the end of a particular accounting period do not reflect the proportion of the shares or, as the case may be, shares of a particular class in the company by virtue of which they have those interests (as in a case where they hold, directly or indirectly, part of the shares in a company which itself holds, directly or indirectly, some or all of the shares in the controlled foreign company) the number of those shares shall be, treated as reduced for the purposes of sub-paragraph (4) or, as the case may be, sub-paragraph (6) above to such number as may be appropriate having regard to—

  1. (a) the immediate interests held by the persons resident in the United Kingdom; and
  2. (b) any intermediate shareholdings between those interests and the shares in the controlled foreign company'.

No. 119, in page 196, line 31, at end insert— '(4A) Any reference in sub-paragraph (3) or sub-paragraph (4) above to a company which a holding company controls includes a reference to a trading company in which the holding company holds the maximum amount of ordinary share capital which is permitted under the law of the territory—

  1. (a) in which the trading company is resident; and
  2. (b) from whose laws the trading company derives its status as a company.'

No. 121, in page 200, line 37, leave out from 'and' to 'or' in line 38 and insert 'either its 51 per cent. subsidiaries or companies falling within paragraph 6(4A) above.'.

No. 120, in page 197, line 26, at end insert— `(aa) of services provided through any other person whose profits or gains from the provision of the services are within the charge to tax in the United Kingdom and who provides the services for a consideration which is, or which is not dissimilar from what might reasonably be expected to be, determined under a contract entered into at arm's length; or'.

No. 180, in page 201, line 39, at end insert—

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