I will not vote for new clause 12, and I will briefly explain why.
A year ago, we enacted the general anti-abuse rule. One argument that Mr Aaronson made when he reviewed that idea was that it would allow us to have fewer of these complicated, focused anti-avoidance rules in Finance Bills and to avoid cluttering up the tax regime with more complexity because we would be able to rely on the general rule. I look forward to seeing that, rather than another huge, thick Finance Bill next year.
Subsection (1) of new clause 12 speaks of
“tax arrangements that are abusive.”
Surely those come within the general anti-abuse rule and can therefore be challenged, even if they are technically legal. Given that, we will not need to come back and assess the three items that are set out, because they will already have been tackled and there will be no further revenue to raise.
I racked my brains and did a bit of googling to try to find methods of tax avoidance using dormant companies. I struggled to think of one, because once a dormant company does something, it ceases to be dormant and therefore cannot be used to avoid tax. If what is meant is that companies are pretending to be dormant, but are actually active and are not filing returns that they know full well are due, that is tax evasion and should be clobbered severely using the existing rules. We probably do not need to create a huge compliance burden for every innocent dormant company out there. There might be sensible reasons for maintaining those companies, such as to protect a name or previous transactions, or simply that the cost and hassle of striking them off are greater than they ought to be. That would be an unreasonable compliance burden to impose.
We should be a bit careful about the language that we use about eurobonds. I have some sympathy with the view that when they were created 40 or 50 years ago and the exemption was passed, Parliament probably did not intend for intra-group loans to be traded randomly on Channel Island stock exchanges but never actually traded, just held by the same third party throughout the period. I see the temptation to remove the exemption and it was right that the Government proposed some sensible ways of doing so two years ago. However, if the Government consult on something and look into the detail, but then decide that it would not raise as much money as they thought and that it would act as a big disincentive to investment, it is unwise to come back to it so quickly. We should learn the lessons from that and just accept that if we want the UK to be attractive to investment and the hub of the private equity industry, which many small businesses in all our constituencies benefit from, it is foolish to risk putting up the cost of borrowing for that industry and adding complexity for it by revising the rules again.
I think that the new clause is superfluous and I will not vote for it.