I beg to move amendment No. 155, in clause 54, page 47, line 28, at end add

'and section 138 of TCGA 1992 (clearance in advance) shall apply to this sub-paragraph as it applies to section 137 of that Act (with any necessary modifications).'.

With this it will be convenient to discuss amendment No. 158, in clause 55, page 48, line 39, at end add

'and section 138 of TCGA 1992 (clearance in advance) shall apply to this sub-paragraph as it applies to section 137 of that Act (with any necessary modifications).'.

Clause 54 seeks to extend to loan relationship issues the clearance regime that applies to the SE legislation in respect of capital gains tax issues. The clause does not apply if a main purpose of the SE's formation by merger was the avoidance of tax. The amendment seeks to use the existing mechanism on capital gains to obtain clearance that the merger does not have a main purpose of tax avoidance.

I turn to amendment No. 158. Clause 55 seeks to extend to derivatives the clearance regime that applies to the SE legislation in respect of capital gains tax issues. Again, the clause does not apply if a main purpose of the formation of the SE by merger was the avoidance of tax, so the amendment seeks to use the existing mechanism in relation to capital gains to obtain clearance that the merger does not have a main purpose of tax avoidance.

I would be grateful if the Minister clarified his view of the clause.

I am not entirely sure that I understood what the hon. Gentleman is asking me to clarify. However, I have two or three points to make that he might find helpful and, if he will bear with me, in doing so I might cover the matter that he was concerned about.

Clauses 54 and 55, as the hon. Gentleman suggested, will broadly ensure that the formation of an SE by merger should, as far as the UK loan relationship and derivative contracts regime is concerned, be tax neutral. In extending the provisions of the loan relationship and derivative contracts regime to give companies that certainty, there is a need, as I am sure the Committee recognises, to ensure that the provisions are not taken advantage of for the purposes of avoiding tax.

New paragraph 12B(5) in this clause and new paragraph 30B(5) in clause 55 contain an anti-avoidance rule. New paragraph 12B(6) in this clause and new paragraph 30B(6) in clause 55 both state that the provisions of sub-paragraphs (5) will not have an effect

''if before the merger Her Majesty's Revenue and Customs have on the application of the merging companies notified them that Her Majesty's Revenue and Customs are satisfied'' that the transaction

''is effected bona fide commercial reasons, and does not form part'' of an arrangement to avoid tax.

I hope that the hon. Member for Braintree appreciates that both new sub-paragraphs (6) aim to make it clear that HMRC is fully prepared to give pre-transaction clearance to any company or companies that are considering merging to form an SE. However, there is no existing statutory clearance procedure within the loan relationship and derivative contracts regime under which that can be given. The procedures will therefore have to be made clear in guidance. I hope that the hon. Member for West Suffolk is satisfied with that explanation.

Yes, I am. I was seeking clarity on the clearance procedures and I am satisfied by the Minister's explanation of what will happen. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 ordered to stand part of the Bill.