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Finance Bill

My right hon. Friend is absolutely right. As he knows, many jurisdictions already have general anti-avoidance regimes—some of the provisions in the Bill are so widely drawn that it looks as though we are moving in that direction—but they typically have strong pre-clearance regimes, which allow taxpayers to establish their position precisely and with a statutorily protected degree of certainty. That is certainly one of the issues that we shall want to explore in Committee. If taxpayers are to be subject to the wide discretionary powers that are proposed not only in relation to tax arbitrage but in other parts of the Bill, the provisions will have to be matched with a strong pre-clearance regime to give taxpayers real certainty over a defined period of time that is not left to the Revenue’s discretion. I come now to clause 39, which introduces schedule 7. It is an anti-avoidance measure, as the Paymaster General said, aimed at complex financial instruments, and it is largely a response to schemes that have come to the Revenue’s attention through the disclosure rules introduced by the Finance Act 2004, which often involve attempts to convert income receipts into capital form to exploit the wide difference between capital gains tax rates and corporate income tax rates. Although some changes have been made since March, experts remain concerned that the Bill is still too wide in scope, that it is poorly and widely drafted and that it will still catch too many innocent commercial activities that it is not intended to catch. We accept the need to address that type of sophisticated tax avoidance, but in Committee we shall want to look closely at the provisions’ retroactive effect and at the powers granted to the Revenue under this schedule. We shall also seek concrete assurances that rapid action will be taken if any of the provisions, once in operation, impose additional tax liabilities on innocent commercial transactions.