Finance Bill

Clause 25 ensures that an agreement reached between a company and the Treasury will be effective for tax purposes if the company relinquishes its right to use tax losses as part of an agreement to access Government financial assistance. The clause will apply to arrangements forming part of an agreement under the asset protection scheme but, as the hon. Member for Fareham (Mr. Hoban) noted, it could be used in other situations, particularly if Government assistance is required to maintain financial stability and restore confidence. It is essential that when such an agreement is reached, we have provision in tax law for the agreement to have the intended effect. As the hon. Gentleman pointed out, the amendment is intended to limit the scope of the clause to arrangements made in accordance with section 257 of the Banking Act 2009, thus making implementation of the clause subject to the laying of a statutory instrument. It is similar in purpose to amendments that he tabled in Committee. On the technical aspects of the amendment, it has been pointed out previously that a statutory instrument would delay the resolution of the terms of any agreement, which could reduce rather than boost market confidence. If a company's agreement to give up its losses were contingent on subsequent parliamentary approval, there would need to be provision in the agreement itself to revisit its terms if that approval were not given. Such terms would mean that the agreement would not have the necessary certainty to achieve its aim of restoring confidence and stability to the markets. The hon. Gentleman made the point that he wanted to narrow the scope of the clause. It is important to bear in mind that it can apply only if a company has agreed to relinquish its losses and if that agreement is pursuant to the company's accessing financial assistance from the Government. He referred to comments that have been made previously about a potential paradox, in that the clause may be seen to be necessarily wide-ranging but will be applied only in narrow circumstances. We believe that limiting the scope of the clause is unnecessary, and that the resulting extra layer of scrutiny would be potentially destabilising. It may mean that deals would need to be struck with absolute certainty and in a very short time scale. My experience of Governments is that they tend to prefer cash to an agreement on tax losses. It would be up to a company that wanted financial assistance to agree voluntarily to relinquish its taxes, and it would be up to the Government to agree that that was in the best interests of taxpayers. In the normal scheme of events, Governments would much prefer to have cash than tax losses, so I do not believe that the clause will be used substantially. When it is necessary to use it in future, it will be right to do so. The amendment would unnecessarily restrict it and be potentially destabilising in the circumstances in which it is likely to be used. For those reasons, I ask the hon. Gentleman to withdraw it.