Finance Bill

Clause 25 creates a legal framework to enable any institution that has taken part in the arrangements set out in subsection (2) voluntarily to waive its tax losses. The clause was required to deal with the particular situation of the Royal Bank of Scotland, which agreed to forgo a certain element of its tax losses as part of its agreement to enter the asset protection scheme. Interestingly, the Government chose to encourage it to forgo its tax losses rather than some of the tax planning activities that the bank carries out on behalf of its customers. I am sure that the Government will be able to justify that later. This framework has been put in place to deal with the price that RBS will pay to go into the asset protection scheme. It is worth noting that when I tabled a parliamentary question asking about the amount of losses that RBS would forgo, the Economic Secretary gave a vaguely worded answer that rather suggested that no one quite knew. Of course the reason for that is that the agreement on the APS is yet to be signed. It may be some months before that happens, and I suspect that the losses to be forgone will not be finalised until that point. However, my concern is not so much that RBS has agreed to enter into the APS at a price—that is a deal struck between it and the Government—but about the breadth of clause 25. Subsection (2) creates a situation whereby if a company enters into an arrangement with any Government Department—not just the Treasury—it can forgo its tax losses if there are any guarantees, indemnities or payments. That potentially covers a wide range of schemes. It may cover the guarantees offered to the automotive sector for loans it is seeking from the European Investment Bank. Under subsection (2)(b)(iv), even the scrappage scheme may be covered, as it contains the phrase""gives other financial support or assistance to P or another person (whether in money or otherwise)."" So even an arrangement in kind could create a situation whereby a company could agree with the Government that in return for such assistance it would forgo its tax losses.