My right honourable friend the Paymaster General (Dawn Primarolo) has made the following Written Ministerial Statement.
The Government propose to introduce legislation in the 2007 Finance Bill to take effect from 22 November 2006, in response to disclosures of schemes which undermine the effectiveness of legislation enacted in the Finance Act 2006.
The legislation will prevent companies from exploiting a mismatch in definitions of ownership of a company or manipulating the balance-sheet value of assets to reduce or cancel the effect of the 2006 legislation.
Schedule 10 to the Finance Act 2006 targeted sales to loss-making groups of lessor companies that were about to become tax profitable. The sales turned an acceptable tax-timing advantage into an unacceptable permanent deferral of tax. The legislation gave a clear signal that this was not acceptable. The disclosures show that some groups are willing to enter into contrived schemes to side-step the 2006 legislation.
The Government have decided to act promptly in response to the disclosures, to emphasise that attempts by companies to avoid paying their fair share of tax are not acceptable.
A copy of today’s HMRC technical note giving the relevant background to this measure has been deposited in the Libraries and is accessible on the HMRC website at www.hmrc.gov.uk/.