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Finance (No. 2) Bill

I thank the Minister for his explanation of these complex and technical changes. He was right to suggest that the consultation process has been thorough and effective. Given that many of the issues on which we have had conflict during the passage of the Bill have been areas on which there has not been proper consultation, that is something on which we can agree. The Minister has taken on board fully the remarks made by tax advisers. On that point, may I put on record my thanks to the advisers who have helped us throughout the passage of the Bill? PricewaterhouseCoopers has helped us to tackle some of the complexities of the Bill, but it was not alone in providing us with guidance, support, suggestions and help. The Minister is right to clamp down on the problem. I understand that taxpayers are trying to obtain tax relief on both the interest and the principal. The example given in the explanatory notes demonstrates the extent to which people will structure such transactions simply to acquire tax relief on them. The amendments are thus valid. My discussions have shown that the industry is broadly content with them. Things such as finance leases were in the original scope of the draft legislation and the fact that they have been taken out is welcome. There is provision in the legislation that when other genuine commercial transactions could be caught by the changes, there is a mechanism for ensuring that they will fall outside the scope of the anti-avoidance provisions. May I ask several questions about repos? The Minister was right to point out that such transactions are ordinarily straightforward. However, the transactions that came to the Government’s attention through the case considered by the special commissioners involved three parties. The original owner sold securities to an interim purchaser, who sold them to someone else, who then sold them back to the original owner—that is quite a complex loop. When considering such transactions, did the Treasury or HMRC do any research to determine whether any valid commercial transactions involved three parties in a tri-party repo arrangement? I understand that there are frequently occasions on which a third party will act as an agent between the two parties to a repo. Will the Minister confirm whether the use of agents will lead to transactions being classified as tri-party repos and thus fall under the terms of the amendments? Clarification on that would be useful because agents are widely used when such transactions are carried out. The third issue is assignment and novation of the arrangements. There may be occasions when, for entirely commercial reasons, existing repos are assigned and novated to another party—for example, as part of a corporate reorganisation or a transfer or takeover of business. In those circumstances, since the assignee would not be the party to whom the securities were originally sold, one would not expect that they would be eligible for tax relief in respect of any deemed manufactured dividend or interest. There is some concern that the new rules might capture those transactions inadvertently. I should be grateful if the Minister responded to those three concerns: has there been any research into the valid commercial use of tri-party repos; will it capture deals where an agent has facilitated the repo; and what will happen where there are assignments and novations as part of an ordinary commercial transaction or corporate reorganisation? Will the Minister clarify those three matters?