CAPITAL ALLOWANCES: BUILDINGS AND STRUCTURES (Hansard, 16 March 1994)

§ Mr. A. J. Beith (Berwick-upon-Tweed)
Are we taking the motions together or singly, Madam Speaker?

§ Madam Speaker
For the convenience of the House, we are taking with the first motion the two following motions relating to PAYE and pre-entry losses: That provision (including provision having retrospective effect) may be made relating to the Income Tax (Employments) Regulations 1993 and the Income Tax (Employments) Regulations 1973. That provision may be made amending Schedule 7A to the Taxation of Chargeable Gains Act 1992.

§ Mr. Beith
Some words of explanation on the third resolution from the Financial Secretary would be helpful in view of the extent of argument that we have had about the treatment of indexation losses in Committee. We are dealing with the ways and means motion after we have dealt with some aspects of the matter in the Standing Committee that is considering the Finance Bill.
The House is entitled to know whether the resolution is designed to enable some refinement of the provisions for indexation losses that members of the Committee do not yet know about, or to do something else. The point that I have sought to put to Ministers is that to remove what have become known as the Lawson reforms on indexation losses is a strange move for the Government to make. The abuses that have led the Government to believe it necessary to abandon what they regarded as important and long-lasting changes in tax law could be dealt with by more specific means.
On the face of it, the ways and means resolution appears to open the way to more specific means of tackling abuses by companies that use subsidiaries as devices to create losses that can be set against gains and, thereby, avoid taxation. That type of abuse could usefully be dealt with, rather than abuses by individuals who, under the changes that the Government propose, will no longer be able to set tax losses in one security against tax gains in another. Of course, if people have their funds in unit trusts, the problem will not arise because the net gains will be considered. However, if people have a small portfolio of shares, they will face a problem.
The resolutions appear to provide an opening to deal with the problem in a better way than the Government are doing. That made me especially intrigued to know what they were up to.

§ The Financial Secretary to the Treasury (Mr. Stephen Dorrell)
The right hon. Member for Berwick-upon-Tweed (Mr. Beith) should be congratulated on his ingenuity in raising again on the Floor of the House a subject that we debated last night in the Standing Committee that is considering the Finance Bill. The resolution and the new clause for which it is a paving measure is not intended to deal with the subject of loss 889 indexation allowance per se. Loss indexation is to do with the quantum of loss relief that is available to a particular taxpayer.
The two defects that will be dealt with as a result of the ways and means resolution are connected with the transferability of losses between companies within a group. Therefore, they deal with a different issue from that which the right hon. Gentleman is worried about. The issue that he raised was dealt with in last year's Finance Bill,—capital loss buying and the abuse, which is perceived as an abuse by hon. Members on both sides of the House, which derives from companies buying capital losses and setting them off against capital gains elsewhere in the group.
We introduced last year anti-avoidance measures to deal with that problem. The measures that will be built on the ways and means resolution which we ask the House to approve now will deal with that aspect of the problem. So the resolutions are directed at the transferability of capital losses rather than the quantum of capital losses.

§ Mr. Nicholas Brown (Newcastle upon Tyne, East)
The official Opposition would have been happy to take the three ways and means resolutions formally, but a few words of explanation are called for following the remarks of the right hon. Member for Berwick-upon-Tweed (Mr. Beith).
The three resolutions that facilitate the blocking of three separate potential avoidance devices do not relate to the matter that the right hon. Gentleman raised. I have every sympathy with him in the matter of substance to which he referred. He was right to say that we had a long and not particularly fruitful discussion of the matter yesterday in Committee.
The three resolutions with which we are dealing all aim to facilitate anti-avoidance legislation. They have the support of the parliamentary Opposition in that. In particular, the second resolution has our support because it is a measure which I called for in the Committee which considered the previous Finance Bill. The Financial Secretary assured us that it was not necessary.