HC Deb 28 April 2004 vol 420 cc890-903

Question proposed, That the clause stand part of the Bill.

12.43 pm
The Paymaster General (Dawn Primarolo)

This clause prevents tax avoidance by married couples who own shares in a close company together. Existing anti-avoidance provisions prevent people from saving tax by diverting their income to someone who pays tax at a lower rate, or not at all. These provisions specifically prevent people from saving tax by arranging for income to be received by someone else as dividends on shares in a close company. At the moment, married couples who own shares in a close company can side-step the anti-avoidance provisions by exploiting section 282A of the Income and Corporation Taxes Act 1988.

Section 282A of the 1988 Act was introduced to simplify the way married couples are taxed, and it treats income from the property that they hold in joint names as being shared equally between them. But when this rule applies to shares in a close company, it can divert income for tax purposes from one spouse to another, allowing them to make an unfair tax saving. Clause 86 ensures that where a husband and wife own shares in a close company together, they will be taxed in accordance with their actual ownership of the shares, rather than half and half. Each couple gets taxed on the income that it receives, and I am sure that the House would agree that that is clearly the right result. The vast majority of married couples will not be affected by clause 86, but now that the loophole is well understood, without it, the loss of tax would grow sharply, so I commend the clause to the Committee.

Mr. Howard Flight (Arundel and South Downs) (Con)

May I first welcome you, Sir Michael, to chairing our deliberations today?

We object in principle to the Government's attack on the established principles of independent taxation and specifically on the tax position of husband-and-wife jointly owned businesses, which is represented by both clause 86 and the surprise attack on husband-and-wife businesses launched last April through the obscure settlements legislation contained in section 660A, with which clause 86 interrelates. As accountants pointed out to their clients, the section 660A attack could be defended by using the provisions of section 282A, to which the Paymaster General referred, and opting for joint ownership with 50:50 taxation, which clause 86 is designed to block.

Section 282A dates from the introduction of independent taxation in 1989 and 1990, when provision was explicitly made for the income from jointly owned assets to be split equally between spouses for tax purposes—unless each chose to split the income in accordance with the ownership. We see no argument for changing the position. Indeed, doing so amounts to a further stealth tax introduced under the guise of alleged anti-avoidance, which seeks to unravel the basis of independent taxation.

The section 660A attack on husband-and-wife owned businesses relies on being able to identify the way in which the shares are owned—namely, separately—as arrangements that create a settlement. The section 660 attack is the subject of litigation, which is set to be heard by the special commissioners this June. A joint statement has been issued by the Chartered Institute of Taxation, the Tax Faculty Institute of Chartered Accountants in England and Wales, the Institute of Chartered Accountants of Scotland, the Association of Chartered Certified Accountants, the Association of Taxation Technicians, the Federation of Small Businesses, the Society of Trust and Estate Practitioners and the non-Inland Revenue members of the Working Together group. The statement strongly criticises the Revenue's new position on section 660A, characterising it as a secret husband-and-wife tax.

In her references yesterday to my raising the matter on Second Reading, I fear the Paymaster General was misled in not appreciating that it was the heads of the UK's leading tax and accountancy bodies who were objecting to the Government's new disguised owner-manager husband-and-wife tax. If left unchallenged, the Revenue's controversial interpretation of section 660A will leave thousands of small owner-manager businesses facing entirely unexpected and significant tax bills, from which, if clause 86 were enacted, they could not protect themselves in the future by moving to joint ownership.

The above professional bodies assess that there are many more than the Revenue's 30,000 owner-manager husband-and-wife businesses at risk, which was the estimate. The Revenue's new interpretation of section 660A dates from 2001, but was then advanced only in an obscure tax manual. Yet it is seeking to apply that new interpretation for at least the last six years.

As the president of the Chartered Institute of Taxation commented, the Revenue has a legal and moral obligation to inform taxpayers of how legislation is going to be applied, and its current approach is a breach of human rights. What are the issues here? By way of illustration, where a couple has set up a business, jointly managed, and one spouse runs it with the other doing a limited amount of unpaid work for the company, and where the net profit of the company after the husband's pay is then distributed equally to the two shareholders as dividends with each having the same shareholding, the Revenue is seeking to claim that the dividends paid to the unpaid spouse should be treated as the husband's income and subject to tax at his higher rate, backdated six years.

Mr. John Burnett (Torridge and West Devon) (LD)

What the hon. Gentleman is saying is of considerable interest to my colleagues and me. Is he saying that the tax treatment envisaged by the Revenue will not reflect the equitable ownerships in the shares?

Mr. Flight

Indeed, that is what I am saying. However, if the hon. Gentleman will be patient, I shall point out that the matter was debated at length in 1989, when independent taxation was introduced. At that time, a Labour amendment contained proposals similar to what the Government are trying to do in this Bill. The then Chancellor made it clear that the amendment would contradict the principles of independent taxation.

A husband and wife can each own shareholdings. The wife's shareholdings may have been given to her by her husband, and I shall refer to a specific quotation in relation to such gifts.

There is a blatant and unacceptable stealth tax where husband and wife assume the same risk on their equity investment. It is wrong for the Revenue to argue that the non-salaried spouse's equity investment is wholly or mainly a right to income. The ownership of a share does not represent just a right to an income.

There was a debate to in Parliament on this matter when the 1989 Finance Bill was being discussed. I understand that the matter was also discussed by the Prime Minister of the day. Also, the Budget press release relating to what became section 660A made it clear that the intention was to make the rules for settlements operate in a way consistent with independent taxation and that the income arising from outright gifts between husband and wife should be taxed as the income of the recipient spouse and not of the person making the gift.

In response to a Labour amendment, which would have rewritten what is now section 660A and which was designed to achieve roughly what the Government are now trying to achieve, the then Chancellor said that it would undermine the very basis of independent taxation, and that people should be free to arrange their affairs as they wished. He said specifically that independent taxation was bound to mean that some couples would transfer assets between them with the result that their total tax bill would be reduced. He said that that was an inevitable and acceptable consequence of taxing husbands and wives separately.

Such is the Government's deviousness that neither the recent Budget notes nor the explanatory notes to this Bill provide any explanation of what clause 86 is really about. They give no clue as to the clause's relationship to the section 660A attack.

Most small business owner-manager couples are as yet unaware of the Government's attempt to undermine their tax position as clearly set out when independent taxation was introduced, and to unravel the principles of independent taxation established in 1989.

I am sure that the special commissioners will come to a just conclusion in relation to the section 660A attack in the case that will come up in June. However, we oppose clause 86, as it undermines the established principles of independent taxation relating to the assets of businesses jointly owned by husbands and wives.

Mr. Burnett

May I, too, begin by welcoming you, Sir Michael, to our proceedings?

Originally, my intention was to reiterate what Liberal Democrat Members had said in earlier debates—that we considered clause 86 to be a sensible anti-avoidance measure. However, if the hon. Member for Arundel and South Downs (Mr. Flight) is right, we will have to reconsider our position.

I hope that the Paymaster General will be able to answer a fairly straightforward question about the settlement provisions in income tax legislation with respect to income deemed to be that of the settlor. It should always be the rule that married couples should be able to organise their affairs in such a way that they can legally mitigate tax. The proposed change will be unacceptable if, when a husband decides to gift shares in a company to his spouse in a way that allows for an equality of shareholding, all the tax will fall on him.

I hope that the Paymaster General will put our minds at rest on this matter. If the thrust of clause 86 is an attack on the independent taxation of spouses, as the hon. Gentleman claims, we will oppose it. Liberal Democrats believe in the principle of independent taxation, and I hope that the Government will not erode that principle. Spouses should always be able to alter their equitable interests in property, free of capital gains tax and inheritance tax. Subsequent to that alteration, they should be taxed according to the equitable interests that they own. If clause 86 alters that, we will have to reconsider our view of the matter.

I listened carefully to the list of eminent bodies recited by the hon. Gentleman. It is a compelling list.

I hope that the Paymaster General can enlighten us on two matters. First, clause 86 refers specifically to "close company". That suggests that the rule is not intended to apply to joint holdings in non-UK resident companies. I refer the Paymaster General to section 414 of the Income and Corporation Taxes Act 1988. It excludes companies that are not resident in the UK from the definition of "close company".

Secondly, will she clarify why the words "equal or" are included in proposed new section 282A(4A)(b) to the 1988 Act? It is difficult to see what form of ownership in joint names of close company shares is not covered by the existing provisions.

Dawn Primarolo

I shall begin by dealing with the question of independent taxation. I hope that I will be able to reassure the hon. Members for Torridge and West Devon (Mr. Burnett) and for Arundel and South Downs (Mr. Flight). I think that they might be misreading the scope of clause 86.

The hon. Member for Arundel and South Downs is right to refer to the debates in 1990, when independent taxation was established. The approach settled on by the Government of the day ensured that, where property and incomes were jointly owned by spouses, the simplest and most straightforward way to apply taxation was on the basis of a 50:50 allocation. I shall come on to explain the target of clause 86 in respect of close companies, but I assure the hon. Gentleman that there is nothing in the clause to disturb that principle.

Mr. Burnett

For the sake of completeness, will the Paymaster General confirm that it was open to taxpayers to elect otherwise and to choose to be taxed according to their equitable interests in shares or other property?

1 pm

Dawn Primarolo

I will come to that point because it is at the heart of this set of proposals, but first I want to reassure Members on the questions of the principle of independent taxation, and then explain exactly how the provisions in the clause will affect the avoidance that has been identified with regard to close companies.

Let us deal with the first proposition that the hon. Member for Arundel and South Downs asserted. There is no attack on the principle of independent taxation. Independent taxation is untouched by the amendment in the clause. The change simply stops couples manipulating the rules to save tax in a way not intended by Parliament when independent taxation was introduced; when married couples genuinely hold shares in close companies in joint names, the present provisions will continue to apply. The hon. Gentleman said that section 660A was an attack on husband and wife businesses, and that is absolutely—

Mr. Flight

The new interpretation of it, not the section itself.

Dawn Primarolo

I am grateful for that clarification. I am saying that it is a long-standing principle that people should not be able to direct income to people who are liable to a lower rate of tax or no tax at all, and that is what section 660A deals with.

Mr. Richard Bacon (South Norfolk) (Con)


Dawn Primarolo

It is important to keep focused for the moment on the question of independent taxation and close companies; afterwards I shall be happy to pick up on other points.

Mr. Bacon

When the Paymaster General says "to people", is she saying that that long-standing principle includes spouses?

Dawn Primarolo

Yes. I am referring to the operation of independent taxation and transfers between spouses. The amendment in clause 86 simply ensures that anti-avoidance legislation is fully effective, as it had always been intended to be. We think that it is right, as I am sure the Committee will agree, that spouses should be taxed fairly and according to their income. Those who do not attempt to avoid those rules will not be affected.

The hon. Member for Arundel and South Downs also said that there had been legal challenges with regard to small businesses about the Inland Revenue's application of settlements legislation, but I say to him that there have been no successful challenges. The tax system is challenged quite a lot.

The amendment plugs a loophole whereby a person who is liable to tax at higher rates avoids tax by transferring his or her income to a spouse who is liable at a lower rate or not at all. It is not a stealth tax; it has nothing to do with section 282A and clause 86, which simply taxes husbands and wives on the income they are entitled to and according to their declarations. I want to come to that point, because it is about the use of the declaration in these circumstances. It also has nothing to do with gifts between husbands and wives; husbands and wives are still free to arrange their affairs as they choose, but they should not be able—I think that we would all agree—to manipulate by legal arrangements, by declaration, in order to avoid tax.

It may help if I explain exactly how the clause works. The settlements legislation exists to stop tax avoidance by means of the transfer of income from a higher-rate taxpayer to someone liable at lower rates or not at all. It is possible to side-step the legislation by transferring property into joint ownership, then declaring that most or all of the income belongs to one person only. The settlements legislation does not apply, because there has been no transfer of income, and section 282A of the Income and Corporation Taxes Act 1988 provides that income from property owned jointly by husbands and wives is taxed at 50:50—the settlement agreed in 1990 on the introduction of independent taxation. So, a person who is entitled to the whole of the distribution from a close company is taxed on only half of it, which was not the intention in 1990, and the clause provides that husbands and wives are taxed on the income to which they are entitled.

I would stress that, in the avoidance that we are seeking to prevent, the husband and wife, having had the joint ownership, produce a legal declaration to apportion not on a 50:50 basis but on a 100:0 basis or 90:10 or whatever, so the taxpayers themselves are declaring that the situation is not 50:50 but something else. They are transferring to the partner—the spouse—who has taxable allowances to use up.

Let us be clear about what the clause does. Its concern is close companies and only close companies—nothing else is affected here—that are jointly owned by a married couple, but where the company is really or mainly owned by one spouse and the married couple make a declaration to that effect. So, they tell us in that declaration that the ownership is not 50:50. Section 660A ensures that husbands and wives are taxed on their proper share in the income from the company.

By making a legal declaration—I should stress that we are using their legal declaration, which is voluntarily provided to the tax authorities—that the ownership is not 50:50, and that the income actually belongs to the partner who is really entitled to it, husbands and wives are trying to neutralise section 660A. That allows section 282A to kick in, attributing income equally even though the taxpayers have told us in the declaration that, truly, it is not equally apportioned. We are trying to get the right result following the declaration that the taxpayer has provided to us about the true nature of the income and assets.

Clause 86 gets us back to the right result. If the legal declaration is an accurate reflection of the ownership of the income—and it must be, because the husband and wife have signed it and declared it as a legal document—the husband and wife will be taxed on that basis. There is no need to look to the special rule that was provided in section 282A to work out their liability, because they have told us what their liability is and the tax consequences follow from that.

Mr. Burnett

I am extremely grateful to the Paymaster General for giving way. I should like to put to her a set of circumstances. Let us imagine that Mr. and Mrs. A form a company. Mr. A has 99 shares; Mrs. A has one share. The company 's income is taxed accordingly, with Mrs. A taking one hundredth and Mr. A 99 hundredths. Three years down the line, Mr. A gives 49 of his shares I hope that I have still got my maths right—to Mrs. A. Will they thereafter be taxed 50:50 or, because of the settlement provisions, will Mr. A be taxed 99 per cent. and Mrs. A 1 per cent.?

Dawn Primarolo

The hon. Gentleman should focus on the declaration. If there is no declaration, the settlement provisions in section 660A will run and section 282A will kick in on the 50:50 split. A legal declaration is provided by the spouses to tell us that the ratio is not 50:50, but some other proportion. We need to follow that for tax purposes. If there is no declaration, the two provisions operate in the way that was always intended. It is not necessary to think up "what ifs". The only "what if" is if there is no declaration to the contrary, how do the two sections in the Income and Corporation Taxes Act operate? That is what I have explained.

The final question that the hon. Member for Torridge and West Devon asked was why the words "equal to" appear. Those words are needed because the clause must include any case in which couples have entered into a legal declaration—we do not require them to enter into such a declaration, but they have decided to do it—in respect of close company shares held in their joint names. If shares are held half and half, income will be taxed half and half. The effect of the clause is that couples will be taxed on their proper share of income, as they declare it to the tax authorities.

I do not see why the Commitee should object to income being taxed fairly, on the basis of information given to the authorities about the close company. The legal declaration seeks to neutralise the working of the two sections. Clause 86 ensures that if there is a declaration, it is followed. If there is no declaration, section 282A will apply, as normal. With that clarification, I hope that the Committee will agree that the clause is appropriate, proportionate and right to close a loophole whereby legal declarations have been used to get round the clear intent of Parliament since independent taxation was introduced in 1990.

Mr. Flight

I apologise for taking the Committee's time but, with respect to the Paymaster General's comments, the clear intent in 1990 was not as she described. She agreed—I thank her—that clause 86 was introduced because if the Revenue is successful in its new interpretation of section 660A, which we object to, the clause removes the section 282A alternative defence. The two are entirely interlinked, in that the essential motive for clause 86 is to support the new initiative under section 660A.

Mr. Burnett

I do not know whether the hon. Gentleman is minded to answer my last intervention on the Paymaster General. What effect will an alteration of equitable interests have? Will it invoke the settlement provisions—income deemed to be that of settlor provisions—in which case the allocation of shares will be altered by declaration of trust or otherwise, but the married couple will still suffer tax as to the ownership prior to the alteration, and the change will not be reflected?

Mr. Flight

I thank the hon. Gentleman. That is precisely the point. My understanding is that, if the Revenue succeeds with its new interpretation of section 660A, the couple, in spite of having transferred to 50:50, will go on being taxed as though the split were 99:1.

Let me elaborate on the areas of dispute in relation to section 660A. By the way, the case comes up on 14 June and I know a little about it, as it concerns a constituent. Perhaps the Paymaster General should be aware that all the bodies whose names I listed have come together to disagree with the Inland Revenue on that case. It is therefore the first test case, which will resolve the matter one way or the other.

The area of dispute in relation to section 660A concerns the application of the settlements legislation where a husband and wife set up a company together, each subscribing for the shares. One party—say, the husband—earns money in the market place, and the wife may play a supportive role, giving advice or organising appointments. After paying employees and the husband's salary, there are sufficient funds in the company for a dividend to be paid to the shareholders.

The Revenue view in its new interpretation of section 660A is that that combination of factors is a settlement, and the necessary bounty is created when the husband takes a salary that might be deemed to be less than market value, so to leave distributable profits. The dividends received by the wife should thus be reallocated to the husband. That is the specific case that the Revenue made in its 64th tax bulletin. The Revenue holds that the mischief in such situations is that the shareholdings adopted and the dividends paid lead to the diversion of income from a spouse who may be liable to tax at the higher rate to the spouse with a more favourable tax situation.

1.15 pm

The contrary argument that all those professional bodies have advanced is as follows: there is a clear exemption in section 660A(6) for outright gifts between husband and wife unless the gift does not carry a right to the whole of that income, or the property given is wholly or substantially a right to income. In a partnership where both the wife and the husband assume the risk of unlimited liability, it is surprising to see the Revenue arguing that the partnership share is wholly or mainly a right to income. In a company, the income comes to the wife by reason of her shareholding, and ordinary shares cannot represent a right to income. They are a bundle of rights, including a right to a share in the underlying capital of the company. The ownership of a share does not represent a right to income. At best, there may be an expectation. There may, in fact, be no income, or the directors may decide not to distribute the income. The wife is contributing to the business, even though she is not the person active in the external marketplace.

At the time of the 1990 Budget and Finance Bill, the Budget press release stated that although the settlements legislation was introduced in the 1930s, the exemption for gifts between spouses was introduced in the 1990 Finance Bill as clause 109. That subsequently became section 108 of the Finance Act 1990, and then section 660A(6) of the Income and Corporation Taxes Act 1988. The purpose of the clause was set out in the relevant Inland Revenue Budget press release: The Chancellor proposes in his budget to make changes in the income tax rules for gifts between husband and wife and for some other settlements. These follow the personal tax reforms in last year's budget. They will make the rules for settlement operate in a way which is consistent with the Government's objective for independent taxation…the changes will ensure that when independent taxation begins in April 1990 income from simple outright gifts of assets between husband and wife and certain pensions allocated between them will be taxed as the income of the recipient and not as the income of the person making the gift.

That was further elaborated in the detailed sections of the release: Under independent taxation the income arising from a gift of an asset between husband and wife will be treated as the recipient's for tax purposes only if it is an unconditional gift of both the asset and the income arising from it. The income will generally be treated as the donor's for tax purposes…if the donor has the right to get back the asset in the future, or to decide what the recipient should do with it", or if the donor uses a trust to give the income to his or her partner while retaining control over the capital or passing the capital to a third party. It should thus be noted that there is no mention of the sort of situation to which the Inland Revenue now refers in its new interpretation of section 660A, which was set out in examples 3 to 5 of its tax bulletin. Indeed, the press release indicated the opposite, by saying that unless the donor retains the underlying asset, the transfer will be effective for tax purposes.

The parliamentary debate on clause 109 of the Finance Bill back in 1990 makes interesting reading. It centred around an amendment tabled by the right hon. Member for Islington, South and Finsbury (Mr. Smith)—I apologise for not knowing his constituency at the time—to rewrite what is now section 660A(6) by adding a subsection that sought to achieve what the Government are currently seeking to achieve. The provision would have applied when the gift did not carry a right to the whole of that income, when the property given was wholly or substantially a right to income, or when the gift was undertaken with the sole or main objective of achieving a tax advantage. The amendment was tabled because the Labour party was concerned that it would be possible to make a gift producing income that was taxed at a lower rate than in other circumstances, especially when one household member was in a higher tax bracket, while the other paid tax at the basic rate.

The Chief Secretary of the time said that the amendment would undermine the very basis of independent taxation and that, if it were carried, there would be no independence for married couples and people would not be free to arrange their affairs as they wished. He added that independent taxation was bound to mean that some couples transferred assets between them, with the result that their total tax bill would be reduced. He stated that that was an inevitable and acceptable consequence of taxing husbands and wives separately. Even more explicitly, he said that the Government had made it clear that they expected that income splitting would occur, and the amendment was withdrawn.

The reallocation of assets between spouses to take advantage of one spouse's personal allowance and lower rates of tax was thus not only contemplated, but accepted by the Government of the time as part of the price for independent taxation. There is no reason why such transfer of assets should not include shareholdings and partnership shares.

I apologise for putting all that on record, but the bottom line is that if the Government wished to reinterpret section 660A, they would have been better off doing it by legislation. Instead, it is being done by Inland Revenue initiative. As has been pointed out, and as the Paymaster General conceded, that matter has an acute relationship with clause 86 and the defence usage of section 282. We therefore oppose clause 86 in principle, and we will certainly do so until the special commissioner's findings emerge in June to resolve the underlying section 660A issue one way or the other.

Mr. Burnett

The Paymaster General stated that married couples should be taxed fairly and that this state of affairs will not be changed or altered by the clause. I put it to the Committee that married couples should be able to alter their shareholdings and should be taxed in accordance with that alteration, and that nothing should be done to disturb that.

There are many reasons why married couples decide to change their shareholdings in close companies. If there is a new marriage and a company is formed, only one share might go to one spouse because the other spouse has put considerably more capital into the project. After a few years of healthy marriage, there will be greater equalisation of those capital assets. These are common-sense matters. Drawing the settlement provisions into these arrangements is absolute nonsense; it should not happen and it is a disgrace.

Dawn Primarolo

Surely, the hon. Gentleman is not saying that in 1990—this is the fundamental point that the hon. Member for Arundel and South Downs, who referred to the debates at that time, also misunderstands—it was expected that we should tax people in a way that was contrary to their explicit declaration as to how income was actually earned, as opposed to the operation of the 50:50 arrangement. It is to a declaration from the taxpayer, which was never discussed then, that the clause seeks to respond, and only in the case of close companies.

Mr. Burnett

I have spent most of my life—or at least quite a lot of it before I came to this place—dealing with close companies an I corporate taxation, and I believe that it should be clear to everyone in the Committee that people, and married couples in particular, should be free to alter their shareholdings, by declaration of trust or otherwise, and then to be taxed in accordance with that alteration. Undermining that principle flies in the face of tax practice for years. Why are transfers between spouses free from capital gains tax? Why are such transfers free from inheritance tax?

Dawn Primarolo

The point is what happens where couples are saying that they jointly own a company and then seek to be taxed in a different way, which is not the 50:50 arrangement.

Mr. Burnett

I have heard what the Paymaster General has said; she has made the same point once or twice. I believe that a declaration should be made at the end of the tax year that reflects the true ownership of the shares and the proportions in which they are owned.

Mr. Flight

May I repeat the complicated point that clause 86 is relevant only because of the reinterpretation of section 660A? It is quite clearly an option for people to choose to hold assets jointly and achieve 50:50 if they are taxed successfully under the reinterpretation of section 660A. Therefore, the business of giving the declaration is not the fundamental underlying point that needs to be debated

Mr. Burnett

I think that all of us in the Chamber have understood that point.

The point that my party and I cannot accept relates to the fact that, if people alter their ownerships in close company shares, they should be taxed in accordance with that alteration. The anti-avoidance or settlement provisions should not bite on that principle, and people should be taxed fairly in accordance with such alterations. It is free and it should be free—I thought that this was the philosophy even of the Labour party—for married couples to make changes in their equitable ownerships. Such changes should be free of capital gains tax and inheritance tax. Such couples should be taxed in accordance not with the previous situation, but with the alterations that they have made in those equitable ownerships and with the circumstances and ownerships that prevail at the time when they make their tax return. What is important is not to erode those principles, but to ensure that married couples can alter their equitable interests and shareholdings and be taxed accordingly.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 266, Noes 160.

Division No. 151] [1:29 pm
Abbott, Ms Diane Davies, Geraint (Croydon C)
Adams, Irene (Paisley N) Dean, Mrs Janet
Ainger, Nick Denham, rh John
Ainsworth, Bob (Cov'try NE) Dismore, Andrew
Allen, Graham Dobbin, Jim (Heywood)
Anderson, rh Donald (Swansea E) Donohoe, Brian H.
Anderson, Janet (Rossendale & Darwen) Doran, Frank
Dowd, Jim (Lewisham W)
Armstrong, rh Ms Hilary Drew, David (Stroud)
Austin, John Drown, Ms Julia
Bailey, Adrian Dunwoody, Mrs Gwyneth
Barnes, Harry Eagle, Angela (Wallasey)
Barron, rh Kevin Edwards, Huw
Bayley, Hugh Efford, Clive
Beard, Nigel Ellman, Mrs Louise
Begg, Miss Anne Farrelly, Paul
Benton, Joe (Bootle) Field, rh Frank (Birkenhead)
Best, Harold Fisher, Mark
Blair, rh Tony Fitzpatrick Jim
Blears, Ms Hazel Fitzsimons, Mrs Lorna
Blizzard, Bob Foster, Michael (Worcester)
Bradley, rh Keith (Withington) Francis, Dr. Hywel
Bradley, Peter (The Wrekin) Gapes, Mike (Ilford S)
Brennan, Kevin Gerrard, Neil
Brown, rh Nicholas (Newcastle E Wallsend) Gibson, Dr. Ian
Godsiff, Roger
Brown, Russell (Dumfries) Griffiths, Nigel (Edinburgh S)
Browne, Desmond Griffiths, Win (Bridgend)
Bryant, Chris Grogan, John
Buck, Ms Karen Hall, Mike (Weaver Vale)
Burden, Richard Hall, Patrick (Bedford)
Burgon, Colin Hanson, David
Burnham, Andy Harman, rh Ms Harriet
Campbell, Alan (Tynemouth) Havard, Dai (Merthyr Tydfil & Rhymney)
Campbell, Mrs Anne (C'bridge)
Campbell, Ronnie (Blyth V) Healey, John
Casale, Roger Henderson, Ivan (Harwich)
Caton, Martin Hendrick, Mark
Challen, Colin Heppell, John
Chapman, Ben (Wirral S) Hesford, Stephen
Chaytor, David Hewitt, rh Ms Patricia
Clapham, Michael Heyes, David
Clark, Mrs Helen (Peterborough) Hood, Jimmy (Clydesdale)
Clark, Paul (Gillingham) Hoon, rh Geoffrey
Clarke, rh Tom (Coatbridge & Chryston) Hope, Phil (Corby)
Hopkins, kelvin
Clarke, Tony (Northampton S) Howarth, rh Alan (Newport E)
Clelland, David Howarth, George (Knowsley N & Sefton E)
Clwyd, Ann (Cynon V)
Coaker, Vernon Hughes, Kevin (Doncaster N)
Coffey, Ms Ann Humble, Mrs Joan
Coleman, lain Iddon, Dr. Brian
Corbyn, Jeremy Illsley, Eric
Corston, Jean Jackson, Glenda (Hampstead & Highgate)
Cousins, Jim
Crausby, David Jamieson, David
Cruddas, Jon Johnson, Alan (Hull W)
Cryer, John (Hornchurch) Jones, Helen (Warrington N)
Cummings, John Jones, Jon Owen (Cardiff C)
Cunningham, Jim (Coventry S) Jones, Kevan (N Durham)
Cunningham, Tony (Workington) Jones, Lynne (Selly Oak)
Davey, Valerie (Bristol W) Jones, Martyn (Clwyd S)
David, Wayne Joyce, Eric (Falkirk W)
Davidson, Ian Kaufman, rh Gerald
Davies, rh Denzil (Llanelli) Keeble, Ms Sally
Keen, Alan (Feltham) Reid, rh Dr. John (Hamilton N & Bellshill)
Keen, Ann (Brentford)
Kelly, Ruth (Bolton W) Robertson, John (Glasgow Anniesland)
Kemp, Fraser
Khabra, Piara S. Robinson, Geoffrey (Coventry NW)
King, Andy (Rugby)
Kumar, Dr. Ashok Roche, Mrs Barbara
Lawrence, Mrs Jackie Rooney, Terry
Laxton, Bob (Derby N) Ross, Ernie (Dundee W)
Lazarowicz, Mark Roy, Frank (Motherwell)
Lepper, David Ruane, Chris
Levitt, Tom (High Peak) Ruddock, Joan
Lewis, Terry (Worsley) Russell, Ms Christine (City of Chester)
Liddell, rh Mrs Helen
Linton, Martin
Love, Andrew Ryan, Joan (Enfield N)
Lucas, Ian (Wrexham) Salter, Martin
Luke, lain (Dundee E) Sarwar, Mohammad
McAvoy, Thomas Savidge, Malcolm
McCabe, Stephen Sawford, Phil
McCartney, rh Ian Sedgemore, Brian
McDonagh, Siobhain Shaw, Jonathan
MacDonald, Calum Sheerman, Barry
McDonnell, John Sheridan, Jim
MacDougall, John Short, rh Clare
McFall, John
McGuire, Mrs Anne Simpson, Alan (Nottingham S)
Mclsaac, Shona Singh, Marsha
McKechin, Ann Skinner, Dennis
McKenna, Rosemary Smith, rh Andrew (Oxford E)
Mackinlay, Andrew Smith, Angela (Basildon)
Mactaggart, Fiona Smith, Geraldine (Morecambe & Lunesdale)
McWalter, Tony
Mahmood, Khalid
Mahon, Mrs Alice Smith, Jacqui (Redditch)
Mallaber, Judy Smith, Llew (Blaenau Gwent)
Mandelson, rh Peter Soley, Clive
Mann, John (Bassetlaw) Southworth, Helen
Marsden, Gordon (Blackpool S) Squire, Rachel
Marshall, Jim (Leicester S) Starkey, Dr. Phyllis
Martlew, Eric Steinberg, Gerry
Merron, Gillian Stevenson, George
Michael, rh Alun Stinchcombe, Paul
Miller, Andrew Stoate, Dr. Howard
Moffatt, Laura
Mole, Chris Strang, rh Dr. Gavin
Moonie, Dr. Lewis Stringer, Graham
Moran, Margaret Stuart, Ms Gisela
Morgan, Julie Tami, Mark (Alyn)
Mountford, Kali Taylor, Dari (Stockton S)
Mudie, George Taylor, David (NW Leis)
Mullin, Chris Thomas, Gareth (Clwyd W)
Murphy, Jim (Eastwood) Timms, Stephen
Murphy, rh Paul (Torfaen) Todd, Mark (S Derbyshire)
Naysmith, Dr. Doug Touhig, Don (IsIwyn)
Norris, Dan (Wansdyke) Trickett, Jon
O'Brien, Bill (Normanton) Trickett,
O'Brien, Mike (N Warks) Truswell, Paul
Osborne, Sandra (Ayr) Twigg, Derek (Halton)
Owen, Albert Twigg, Stephen (Enfield)
Palmer, Dr. Nick Tynan, Bill (Hamilton S)
Pearson, Ian Walley, Ms Joan
Perham, Linda Wareing, Robert N.
Picking, Anne Watson, Tom (W Bromwich E)
Pickthall, Colin White, Brian
Pike, Peter (Burnley) Whitehead, Dr. Alan
Plaskitt, James
Pollard, Kerry Williams, rh Alan (Swansea W)
Pope, Greg (Hyndburn) Winnick, David
Pound, Stephen Winterton, Ms Rosie (Doncaster C)
Primarolo, rh Dawn
Prosser Gwyn Woodward, Shaun
Quinn, Lawrie Woolas, Phil
Rapson, Syd (Portsmouth N) Worthington, Tony
Raynsford, rh Nick Wright, Anthony D. (Gt Yarmouth)
Reed, Andy (Loughborough)
Wright, David (Telford) Tellers for the Ayes:
Wright, Tony (Cannock) Ms Bridget Prentice and
Wyatt Derek Charlotte Atkins
Ainsworth, Peter (E Surrey) Jack, rh Michael
Amess, David Jenkin, Bernard
Arbuthnot, rh James Jones, Nigel (Cheltenham)
Bacon, Richard Keetch, Paul
Baker, Norman Kennedy, rh Charles (Ross Skye & Inverness)
Baron, John (Billericay)
Barrett, John Key, Robert (Salisbury)
Beggs, Roy (E Antrim) Kirkbride, Miss Julie
Beith, rh A. J. Knight, rh Greg (E Yorkshire)
Bellingham, Henry Laing, Mrs Eleanor
Bercow, John Lamb, Norman
Beresford, Sir Paul Lansley, Andrew
Boswell, Tim Laws, David (Yeovil)
Bottomley, rh Virginia (SW Surrey) Leigh, Edward
Lewis, Dr. Julian (New Forest E)
Brady, Graham Liddell-Grainger, Ian
Brake, Tom (Carshalton) Lidington, David
Brazier, Julian Lilley, rh Peter
Breed, Colin Llwyd, Elfyn
Brooke, Mrs Annette L. Luff, Peter (M-Worcs)
Browning, Mrs Angela McIntosh, Miss Anne
Burnett, John McLoughlin, Patrick
Burns, Simon Maples, John
Burnside, David Mawhinney, rh Sir Brian
Cable, Dr. Vincent May, Mrs Theresa
Calton, Mrs Patsy Mitchell, Andrew (Sutton Coldfield)
Campbell, Gregory (E Lond'y)
Carmichael, Alistair Moore, Michael
Chidgey, David Moss, Malcolm
Chope, Christopher Murrison, Dr. Andrew
Clifton-Brown, Geoffrey Norman, Archie
Cotter, Brian Oaten, Mark (Winchester)
Davey, Edward (Kingston) O'Brien, Stephen (Eddisbury)
Djanogly, Jonathan Öpik, Lembit
Dodds, Nigel Osborne, George (Tatton)
Donaldson, Jeffrey M. Page, Richard
Doughty, Sue Paice, James
Duncan, Alan (Rutland) Paisley, Rev. Ian
Duncan, Peter (Galloway) Price, Adam (E Carmarthen & Dinefwr)
Duncan Smith, rh lain
Ewing, Annabelle Prisk, Mark (Hertford)
Fabricant, Michael Pugh, Dr. John
Fallon, Michael Randall, John
Field, Mark (Cities of London & Westminster) Redwood, rh John
Reid, Alan (Argyll & Bute)
Flight, Howard Robathan, Andrew
Flook, Adrian Robertson, Angus (Moray)
Forth, rh Eric Robertson, Hugh (Faversham & M-Kent)
Foster, Don (Bath)
Fox, Dr. Liam Robertson, Laurence (Tewk'b'ry)
Francois, Mark Robinson, Mrs Iris (Strangford)
George, Andrew (St. Ives) Robinson, Peter (Belfast E)
Gibb, Nick (Bognor Regis) Roe, Mrs Marion
Gidley, Sandra Rosindell, Andrew
Goodman, Paul Ruffley, David
Grayling, Chris Russell, Bob (Colchester)
Green, Matthew (Ludlow) Salmond, Alex
Greenway, John Sanders, Adrian
Hague, rh William Shepherd, Richard
Hammond, Philip Simmonds, Mark
Harvey, Nick Simpson, Keith (M-Norfolk)
Hawkins, Nick Smith, Sir Robert (W Ab'd'ns & Kincardine)
Hayes, John (S Holland)
Hendry, Charles Smyth, Rev. Martin (Belfast S)
Hermon, Lady Spelman, Mrs Caroline
Hoban, Mark (Fareham) Spicer, Sir Michael
Holmes, Paul Spink, Bob (Castle Point)
Horam, John (Orpington) Spring, Richard
Hughes, Simon (Southwark N) Steen, Anthony
Hunter, Andrew Stunell, Andrew
Swayne, Desmond Webb, Steve (Northavon)
Swire, Hugo (E Devon) Weir, Michael
Taylor, John (Solihull) Whittingdale, John
Taylor, Matthew (Truro) Wiggin, Bill
Taylor, Dr. Richard (Wyre F) Williams, Hywel (Caernarfon)
Thomas, Simon (Ceredigion) Williams, Roger (Brecon)
Thurso, John Willis, Phil
Tonge, Dr. Jenny Wilshire, David
Trend, Michael Winterton, Ann (Congleton)
Trimble, rh David Wishart, Pete
Turner, Andrew (Isle of Wight) Yeo, Tim (S Suffolk)
Tyler, Paul (N Cornwall) Younger-Ross, Richard
Tyrie, Andrew Tellers for the Noes:
Waterson, Nigel Gregory Barker and
Watkinson, Angela Mr. Peter Atkinson

Question accordingly agreed to.

Clause 86 ordered to stand part of the Bill.

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