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Postal Services Bill [HL]

My Lords, Schedule 2 to the Bill contains tax provisions relating to a restructuring of the Royal Mail group of companies. This technical amendment changes paragraph 4 of that Schedule. It may be helpful if I explain the purpose of that paragraph before I turn to the detail of the amendment. The movement of assets between companies in the same group is generally tax-neutral under existing tax rules. However, anti-avoidance degrouping rules can cause a tax charge to arise when a company which received an asset is subsequently regarded as leaving the same tax group of companies. As we have previously outlined, the introduction of a partner will require a reorganisation of the current group under Royal Mail Holdings. This restructuring and the subsequent sale of a minority stake in Royal Mail Group Ltd to a partner could result, for tax purposes, in Royal Mail Group Ltd or one of its subsidiaries being regarded as having left the tax group, hence triggering a tax charge. Paragraph 4 is intended to prevent a tax degrouping charge from arising in the case of a subsidiary of a Royal Mail company that is publicly owned. Royal Mail Group Ltd will remain publicly owned, unless primary legislation is introduced to change that. Subsidiaries of Royal Mail Group Ltd that are not themselves designated as Royal Mail companies could, in theory, cease to be publicly owned. We have no plans to do that but, should it occur, the subsidiary would be treated as leaving the tax group at that time. Turning to the amendment, although the intention of paragraph 4 is relatively straightforward, the possible application is not. A range of possible scenarios could arise, depending on which subsidiaries are affected and the timing of asset transfers and degrouping events for tax purposes. We have now identified that although paragraph 4 as drafted delivers the appropriate tax treatment for the majority of those scenarios, it does not do so for all. Failure to address that could result in an unintended tax advantage for the subsidiary leaving the group and the buyer. We therefore seek to replace paragraph 4 with an amended version, ensuring that the appropriate tax treatment will apply in every case. I beg to move. Amendment 16 agreed. Amendment 17 not moved.