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Finance (No. 2) Bill

These amendments cover two similar areas. They deal with changes to the legislation on ““repos””—the name for agreements for the sale and repurchase of securities—and introduce legislation on the factoring of income generally, replacing existing legislation on the factoring of rents from land. Both these areas involve anti-avoidance rules. Amendments Nos. 99 to 101 deal with factoring of income generally and are more substantial, so I will describe them first. The ideas behind the rules for structured finance arrangements are not new; they build on, extend and replace legislation introduced in 2000 called rent-factoring. However, the structures that Her Majesty’s Revenue and Customs has seen recently are new: they take rent-factoring ideas and extend them to types of receipts other than rents. Before turning to the detail, it may be helpful to start by outlining why the amendments are being introduced at this stage of the Finance Bill cycle, rather than on Budget day. The context is that, earlier this year, the HMRC became aware that a major corporation had entered into the new type of factoring scheme to avoid paying tax on significant amounts of income. At that stage, the HMRC was not aware of the detailed mechanics of the scheme, so the Government were not in a position at Budget time to introduce properly targeted legislation. Work continued to ensure that the scheme was properly understood and then on developing a legislative solution. On 6 June, my right hon. Friend the Paymaster General announced to Parliament that the Government would introduce amendments to the Finance Bill on Report to ensure that the new type of factoring arrangement would be properly taxed, and that the legislation would have effect from 6 June. On that day, HMRC published draft legislation and a detailed explanatory statement on its website identifying the types of scheme that the legislation would affect. It also invited interested parties to attend a longer open day later in June, with HMRC and Treasury officials, with the object of clarifying the new rules and identifying any areas where they might need to be amended. As I said, this is, in essence, anti-avoidance legislation. The Government do not usually consult about anti-avoidance legislation.