Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss that schedule 37 be the Thirty-seventh schedule to the Bill.

As discussed under the previous clause, stamp duty land tax schemes have sought to exploit uncertainties in current legislation. We therefore welcome the removal of such uncertainties through amending and supplementing the existing legislation or through drafting a replacement set of rules. However, concerns have been expressed by the industry regarding the drafting of the clauses, given that, for example, new schedule 2A of the Finance Act 2003 will have 104 sub-paragraphs in place of the current nine subsections of section 45 of that Act.

The Chartered Institute of Taxation said:

“The draft clauses have been formulated as a complex set of prescriptive rules. Legislation of this nature tends to create opportunities for structuring transactions in a way that is not intended thereby defeating its object of preventing abuse. We do not think this is the right approach to tightening these rules.”

The institute also shares the concern of the Stamp Taxes Practitioners Group that the new legislation is likely

“to severely hamper genuine commercial and residential property transactions because it is not readily intelligible to conveyancers and property lawyers who will need to apply it in practice. The drafting is tortuous, subsales (the most common type of transaction covered by the draft clauses) are variously defined as ‘pre-completion transactions’, ‘free-standing transfers’ and ‘qualifying subsales’.

Practitioners do not recognise the estimate of numbers of transactions that are likely to be affected by these provisions. There appears to be a significant under-estimate of the likely number of such transactions.”

HMRC has promised clear guidance upon which taxpayers and their advisers will be able to rely. However, I am sure the Minister will agree that, particularly where guidance attempts to soften the harsher effects of prescriptive legislation, there is a fine line between interpretation and concession, which goes beyond HMRC’s powers. If guidance crosses the line into concession, the ability to rely on that guidance is thrown into doubt. Will the Minister outline what process will be undertaken to ensure that the guidance is clear and fit for purpose and will not fall victim to such pressures?

It is perhaps inevitable that the guidance will not be able to cover every possible situation, but a number of situations have been highlighted because there is concern that the guidance will not clarify them and that they will remain distinctly unclear. If the Minister is aware of the Chartered Institute of Taxation’s concerns about the technical application of the new legislation and the guidelines, it would be helpful if he could provide reassurance that they have been considered by HMRC and the Government in drafting the provisions.

The institute has raised a number of issues, which I will not go into for the sake of brevity. However, will the Minister comment on the variety of concerns that have been expressed about the drafting of the legislation and the lack of clarity? The new legislation could facilitate additional avoidance rather than deliver the intended aim, which, as the Minister says, is that everyone pays stamp duty land tax fairly and equitably.

Clause 193 will reform an area of the stamp duty land tax code that has been the subject of extensive attempted avoidance. It will apply to transactions that are currently known as transfer of rights, which will in future be called pre-completion transactions.  The new rules are designed to replicate the tax outcome of the current rules for commercial transactions, but to be robust against attempted abuse.

The transfer of rights rules cover situations in which someone enters into a contract to acquire land and then enters into a further agreement before completing the purchase—either to sell on the land, or to sell their rights to the land. The rules determine how much tax the final purchaser should pay and allow the initial purchaser to disregard the acquisition if certain conditions are met.

Over a number of years, there have been repeated attempts to devise SDLT avoidance schemes using the transfer of rights rules. Such attempted abuse has continued in the face of several small legislative changes to put beyond doubt that such schemes do not work. At Budget 2012, the Chancellor therefore made it clear that continued attempted abuse would not be tolerated. Among other things, he announced that HMRC would consult on reforming the transfer of rights rules, and the clause and the schedule are the outcome of that consultation.

Clause 193 will introduce a new set of rules for pre-completion transactions, replacing and superseding the current rules for the transfer of rights. Although the new rules are similar in scope to the old ones, they contain three major differences. First, the initial purchaser will no longer be able simply to disregard the initial transaction; instead, the initial purchaser will have to claim relief in a normal land transaction return. The relief will be available only for pre-completion transactions that are sub-sales or assignments.

Secondly, relief for the initial purchaser will be subject to an avoidance purpose test. Relief will not be available when the pre-completion transaction forms part of arrangements for avoiding tax. Thirdly, the ultimate purchaser will be subject to a minimum consideration rule if they are connected with, or not acting at arm’s length from, the initial purchaser, which will ensure that the ultimate purchaser is charged an appropriate amount of tax.

The hon. Member for Newcastle upon Tyne North raised concerns about the length and complexity of the legislation. It would be fair to say that there can sometimes be a tension in tax law between brevity and clarity. We have sought to make the legislation as clear as possible, although I accept that that has been at the expense of brevity. Part of the problem is that the current legislation applies the same rules to a number of different types of transaction. That makes the legislation succinct, but its brevity has led to the perceived lack of clarity that I mentioned.

In the public consultation on the revision of the rules, there were calls for the types of transaction to be differentiated and the tax treatment to be made clearer. We therefore decided to unpack the different transactional processes and to show the tax impact at each stage. The unpacking of the creation of deemed transactions added to the complexity, which had previously been avoided by a complete disregard of the first transaction. The level of attempted abuse meant that the disregard could no longer be retained. The legislation became more complex to ensure that all intermediate transactions were catered for when they had previously been disregarded.

The hon. Lady also asked about guidance. HMRC has issued draft guidance that includes examples of how a range of scenarios should be treated. That guidance covers common and straightforward situations, as well as some more complex ones. HMRC has invited comments on how the guidance can be extended and improved in the run-up to the new rules coming into effect, and that guidance will ultimately be included in HMRC’s SDLT manual. I hope that that provides hon. Members with all the information required.

The measure forms part of the Government’s actions to make sure that purchasers of land pay their fair share of tax. It is designed to make it clear that this aspect of the SDLT rules cannot be abused to avoid tax.

Question put and agreed to.

Clause 193accordingly ordered to stand part of the Bill.

Schedule 37 agreed to.