Companies Act 2006 (Amendment of Part 23) (Investment Companies) Regulations 2012

Lord Young of Norwood Green Excerpts

Monday 19th March 2012 Grand Committee

[Lord Razzall]

My Lords, I welcome these regulations. It is clearly not sensible that HMRC should propose amendments which, unless the Companies Act is changed, cannot be implemented. I have just one question, which may be difficult to answer. It is suggested that the objective of HMRC is to try to increase the number of investment trusts that become domiciled in the UK in order to take advantage of these changes in company law and tax law. Page 8 of the impact assessment states that,

“there are 200 registered as ‘investment companies’ under the Companies Act”,

but that there are 320 quoted investment companies, which suggests that there is the potential for an additional 120 companies to register. Is that right? If the objective is to get companies that are quoted on other exchanges to register here, it could be presumed that a limitless number of companies might take advantage of these rules. I assume that the 120 companies referred to here are only UK companies, and it would be difficult to estimate the potential if that is HMRC’s objective.

[Lord Young of Norwood Green]

I enter this debate with some trepidation because it is certainly not my favourite subject. I listened carefully to the Minister throughout her complex analysis of the benefits, but I am not sure that I fully comprehended it, so I apologise if I have to call for a bit of reiteration. I have two questions to put. The first is on risk-spreading investment vehicles. Given the problems that we have had with risk and financial collapses, is the Minister satisfied that the requisite safeguards are in place in these companies? Secondly, can the Minister explain in a little more detail precisely what benefits, following the changes to the corporation tax regime, will arise from realigning company law in this way?

--- Later in debate ---

[Baroness Wilcox]

The noble Lord assumed correctly, of course, which is excellent.

In answer to the noble Lord, Lord Young of Norwood Green, tax issues have been debated in the House of Commons and are now in place. I have not brought these details with me but I would be very happy to provide the noble Lord with those. I do not think that those details will make a fundamental difference to what we are asking for today. I hope he will bear with me on that. The noble Lord also asked about the corporation tax regime, which gives exemption to investment companies from corporation tax on their chargeable gains if they satisfy conditions.

In parallel, investment companies and their investor-shareholders will benefit from the removal of an unnecessary restriction. Investment companies will be able to pay dividends out of capital profits without losing their ability to benefit from the special distributions regime in the Companies Act.

Unless there are any further questions—

[Lord Young of Norwood Green]

I asked about risk. What are the safeguards in relation to assessing risk?