§ Mr. Budgenasked the Chancellor of the Exchequer when drafts will be published of legislation to be introduced in the Finance Bill 1984 to counter the avoidance of tax through the use of group relief.
§ Mr. MooreWith my approval the Inland Revenue is publishing draft legislation on this subject today.
Clauses 38 and 39 of this year's first Finance Bill—with schedule 6 — were designed to counter tax avoidance through the use of group relief where a company disposes of assets acquired before it joins a new group. Clause 38 dealt with the case where the disposal precedes the change of group; clause 39 and schedule 6 dealt with the cases where the disposal comes after the change. These provisions were dropped from the first Finance Bill when its passage had to be accelerated because of the impending general election.
We have reviewed these clauses carefully in the light of subsequent representations. In general, there was broad acceptance of the need for action, in particular in the cases covered by clause 38. Some of those who commented, however, suggested an alternative approach, in particular in relation to post-entry disposals, under which transactions would be affected only where the securing of a tax advantage was the main motive or benefit. But this kind of approach is necessarily less certain than a test with clear-cut rules which we continue to believe would be more appropriate in these cases.
The immediate problem relates in the main to pre-entry disposals and there are already provisions on the statute book which may counter avoidance in some other cases. With this in mind my right hon. Friend the Chancellor of the Exchequer has decided not to reintroduce in next year's Finance Bill provisions along the lines of the former clause 39 and schedule 6. This will make a welcome simplification to the original proposals. But we shall keep a careful watch on the situation, and, if the need arises, we shall take further legislative action to counteract any avoidance involving post-entry disposals.
93WAs for pre-entry disposals, we intend to reintroduce a provision in next year's Finance Bill broadly along the lines of the former clause 38. However, we have included in the draft legislation a number of technical changes to take account of detailed points which were put to us. We propose that, as revised, the provisions should take effect from today.