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FINANCE BILL [WAYS AND MEANS]

House of Commons, 6 July 2004.

Rent factoring of leases of plant and machinery

Dawn Primarolo (Labour, Bristol South)

I beg to move,

That provision may be made in the Finance Bill for the purposes of income tax and corporation tax in relation to arrangements for the transfer of a person's right to receive rentals under a lease of plant or machinery.

The resolution paves the way for a new anti-avoidance provision relating to a newly devised arrangement for the sale of rental streams from leased plant or machinery. The new avoidance schemes have emerged since the Budget, hence the need for the resolution, and depend on selling taxable lease-rental streams for sums on which tax will not be payable.

The new provision, which will have effect where arrangements to sell the right to the income stream are entered into on or after 2 July, will ensure that the sums received from the sale of such rental streams are brought into account when computing income for tax purposes.

Question put and agreed to.

Manufactured dividends and interest

Dawn Primarolo (Labour, Bristol South)

I beg to move,

That provision may be made in the Finance Bill in relation to payments, and deemed payments, by companies of—

(a) manufactured dividends,

(b) manufactured interest, or

(c) manufactured overseas dividends,

within the meaning of Schedule 23A to the Income and Corporation Taxes Act 1988.

The resolution covers provisions in the Finance Bill that prevent companies from avoiding corporation tax by entering into a range of artificial arrangements that involve manufactured payments.

The arrangements vary in detail, but usually involve claiming tax relief for a manufactured payment while arranging for any counterbalancing income or gains to escape taxation in some way.The clause works by introducing an unallowable purpose rule for manufactured payments. The rule denies tax relief for the manufactured payment to the extent that payment is attributable to the unallowable purpose.

Where tax avoidance is the main, or one of the main, motives behind a company entering into these arrangements, it will be denied a tax deduction, thereby defeating the avoidance. The measure will apply to manufactured payments made on or after 2 July 2004, subject to transitional provisions for payments made under arrangements already in place.

Question put and agreed to.

Gifts etc. of shares, securities or real property to charities

John Healey (Labour, Wentworth)

I beg to move,

That provision may be made in the Finance Bill amending section 587B of the Income and Corporation Taxes Act 1988.

The resolution paves the way for an amendment to section 587B of the Income and Corporation Taxes Act 1988 to restrict the value of income tax relief available in relation to a gift of shares or securities to charity to the net amount by which the charity benefits, rather than the market value. We will debate this as new clause 11.

The amendment has become necessary because we have recently uncovered evidence of a scheme using a complex arrangement of trusts and options to manipulate the value of gilts donated to charities. The scheme aims to achieve tax relief for the individual making a donation at negligible cost and negligible benefit to the charity, and it has the potential of returning virtually the whole value of the gift to the control of the individual. There is potentially no limit on the amount of tax relief at stake. This is an unacceptable abuse of legislation designed to provide additional giving to charity.

Question put and agreed to.