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Finance Bill

I hesitated a little before speaking, because I noticed the activity of the Opposition Whip among the Back Benchers earlier, so I wondered whether there were any more Back Benchers with a sudden interest in the particularly narrow provision that we are considering under the schedule. The hon. Member for Wimbledon (Stephen Hammond) and the hon. Member for Ludlow (Mr. Dunne) made a series of points wider than the narrow provisions covered by Amendment No. 16, which might have been more suited to a stand part debate. They paid tribute to the successful venture capital industry in this country, so no doubt they will welcome many of the policies that we have put in place since 1997 to help that—regional venture capital funds, booster venture capital trusts, the enterprise investment scheme, and the 10 per cent. cut in capital gains tax on business assets held for more than two years. As I have said, amendment No. 16 is narrowly drawn, to narrow the scope of the parties affected by the new transfer pricing rules. As the hon. Member for Runnymede and Weybridge said, to limit the class of persons within the scope of the new rules, the amendment would restrict the extension of the new rules to parties with an interest in the shares of the company involved. However, the chance for interests to act together to set up abusive financing transactions is not limited to such parties, so narrowing the scope of the new rules in that way would risk opening new loopholes. The new rules have no tax consequences for transactions made on an arm’s length basis, so there is no reason why their scope should cause any real problems for ordinary commercial transactions. The hon. Gentleman was particularly concerned about banks and third-party bank lending. Let me confirm clearly for him that where banks act together in relation to the financing of a business with other persons who control a company, the new rules apply. However, if the bank lends on an arm’s-length basis, the tax position will not change. Indeed, businesses should not expect to obtain deductions for costs of debt finance over and above the arm’s length amount. The position with regard to the hon. Gentleman’s concern about mezzanine finance with equity warrants is similar. That can be provided, and often is, on an arm’s-length basis. There is no reason, as far as I can see, why that should give rise to particular difficulties in applying the new rules, so long as it is provided on an arm’s-length basis. A couple of hon. Gentlemen, including the hon. Member for Runnymede and Weybridge, talked about the complex nature of banks’ activity and the imposition of these rules. Where banks are just providing an ordinary loan on an arm’s-length basis, the work undertaken in the normal course of that lending should be sufficient to demonstrate that. Therefore, the provisions of the schedule are not an additional compliance burden with significant costs for banks, about which the hon. Member for Wimbledon was concerned. The reason why we are extending these rules—