PUBLICATION OF FINANCE BILL 2005

26 May 2005 10:15 AM

The first Finance Bill of the new Parliament is published today. The Bill, to be known as Finance Bill 2005, reintroduces legislation announced in Budget 2005 that was not enacted by Finance Act 2005. The Government has also responded to representations made since 24 March by making a number of changes to legislation in the Bill as introduced.

Paymaster General Dawn Primarolo said:

"The Government believes that the measures introduced by the original Finance Bill presented to the House are essential for an effective, principled, targeted and fair tax system, that maintains the UK's competitiveness, but acts where there is a loss to the UK Exchequer. This new Finance Bill fulfils our commitment to reintroduce these clauses."

The attached Lobby Notes briefly describe the clauses and schedules in the Bill. More detailed Explanatory Notes on clauses are available from Stationery Office bookshops and on the Treasury website.

NOTES FOR EDITORS

1. This is the third Finance Bill to be published this year, and reintroduces clauses introduced in the original Finance Bill 2005 (published 24 March 2005), but omitted from Finance (no.2) Bill (published 6 April), which was enacted on 7 April 2005 as Finance Act 2005.

2. In responding to representations, the Government has made amendments
in the following areas:

* Avoidance involving Tax Arbitrage - the legislation will allow companies to amend their returns to adjust the amount of deduction claimed, and extends the "grandfathering period", which gives transitional protection to some companies, to 31 August 2005. Revised guidance covering these points, and the operation of the new Arbitrage legislation is available from HM Revenue and Customs (http://www.hmrc.gov.uk/finance_bill2005/index.htm).

* Avoidance involving Financial Arrangements - the legislation has been amended to ensure that it doesn't affect routine arrangements concerning preference shares and other common corporate structures not set up for the purposes of tax avoidance. The regulation-making power has also been amended so that it can only be exercised prospectively.

* Insurance Companies - a regulation-making power that provides that the Treasury may amend a number of life assurance company tax provisions relating to apportionment of income and gains has been time-limited. Other minor changes deal with deemed returns on certain transfers of business, the taxation of certain income at special rates of corporation tax, regulation making powers in relation to overseas life insurance companies and the definition of pension business.

* Miscellaneous amendments to stamp duty land tax - changes have been made to ensure the legislation works as intended for home reversion plans, for loans or deposit schemes and to ensure that group-relief clawback cannot be avoided by the use of leases.

* European Company Statute - the legislation has been extended to ensure that the UK intangible assets regime is fully compliant with the EU Mergers Directive.

Further information containing the precise details of the changes is available on the HMRC website
(http://www.hmrc.gov.uk/finance_bill2005/index.htm)

3. The Government has also made minor technical changes to some other clauses, none of which affect the substance of the legislation. The details of these changes are also available on the HMRC website.

4. The Finance Bill also contains a new clause and schedule (clause 37, schedule 6), which make amendments to the International Accounting Standards legislation in Finance Act 2005. This responds to representations that the legislation was inhibiting commercial restructuring, and makes a number of other minor technical changes. The full details are contained in the Explanatory Note, available on the Treasury website.

5. The date of the Second Reading debate in the House of Commons will be
announced in due course.

6. Explanatory Notes are available for each clause and schedule of the Bill. The Notes are being placed in Parliament alongside the Bill.

7. In addition, the Bill and the Explanatory Notes are both published by the Stationery Office and will be available in electronic and paper formats. The Finance Bill is available from Stationery Office bookshops, priced £11.00, as are the Explanatory Notes, priced £13.00. The Finance Bill is available from the Parliamentary website www.parliament.uk. The Explanatory Notes and Lobby Notes can be found on the Treasury website
http://www.hm-treasury.gov.uk./consultations_and_legislation/consult_finance_2005/finance_bill_index2005

8. Further Explanatory Notes will be made available by HM Treasury for
amendments to the Finance Bill as and when they are made during its passage through Parliament. Also, where Ministers undertake to write to Members of Parliament with further detailed explanations regarding a particular measure, such letters will be placed on the HM Treasury or HM Revenue and Customs websites as appropriate.

9. Non-media enquiries should be addressed to the Treasury Correspondence and Enquiry Unit on 020 7270 4558 or HM Revenue and Customs on 0845 010 9000 or by e-mail to
public.enquiries@hm-treasury.gov.uk.

10. This press release and other Treasury publications and information area available on the Treasury website at
www.hm-treasury.gov.uk. If you would like Treasury press releases to be sent to you automatically by e-mail you can subscribe to this service from the press release site on the website.