CLAUSE 27.—(Allowances for capital expenditure on scientific research.) (Hansard, 14 June 1944)

§ Sir G. Schuster
I beg to move, in page 15, line 28, at the end, to insert: Provided that, if before the conclusion of hostilities or within twelve calendar months thereafter any person deposits with the Commissioners of Inland Revenue, in accordance with such conditions as may be laid down by them, any sum to be used as soon as practicable by way of capital expenditure on scientific research as defined in paragraphs (a) and (b) of this subsection, he shall be deemed to have incurred such expenditure for the purposes of this section. This is rather an ambitious Amendment. From what my right hon. Friend has already said, I anticipate that he may raise objections to it, since I rather think he indicated that one of the reasons for not agreeing to an earlier Amendment was that he thought that might lead to this point being raised. I still, however, want to urge it on him. When we put this Amendment down we thought that a provision of this kind might help my right hon. Friend. It refers to research, but it might help him in a wider sphere to meet what we understood to be a difficulty 2018 that he felt. If I interpreted rightly the spirit which animated his Budget speech, he definitely wants to encourage the making of timely provision for replacing plant and undertaking capital expenditure, but that he feels in a great difficulty about allowing sums which are merely put aside as reserves to be treated as deductions from profits. We thought that in this Amendment we had provided him with a means of getting over this difficulty. The sums would be allowed as deductions from profits subject to conditions which would be under the control of the Revenue authorities. The provision, therefore, could not be abused, but it would enable business undertakings to make timely provision in advance for expenditure which will have to be undertaken some time hence if they are to carry on their businesses or undertake research in a progressive way. I am sure that my right hon. Friend will appreciate the value of this and of having provision made in advance. I believe he will also appreciate that it is in the national interest that money should be set aside now for purposes which will have to he undertaken after the war. I therefore hope that he can give favourable consideration to this Amendment and that, if he is not ready to accept it now as an Amendment to the Finance Bill, he will consider the introduction of a provision of this kind in the special legislation which he contemplates introducing before the end of the year.

§ Mr. Price
This Amendment also contains an important principle about which the Committee should have a statement from the Chancellor. A situation might arise after the war which would embarrass firms that are anxious to carry out research work on important branches of science. The Chancellor indicated on a former Amendment that it is difficult for firms to obtain labour or raw material to carry on capital expenditure of this nature because of the war. At the same time, we ought to bear in mind the situation which will arise after the war if no provision has been made for putting money by to meet this expenditure. It is right that there should not be capital expenditure of this kind now, but how will it be possible for a firm suddenly to find a considerable sum of money when the war is over to carry out research work of a capital nature? Buildings, instruments, appliances and equipment are often very expensive, and it may not be 2019 possible in a single year for a firm to be able to finance the expenditure. Therefore, it seems reasonable, provided there are safeguards against abuse, to enable firms to put by reserves into a special fund earmarked for the purpose of capital expenditure on scientific research after the war. That is the object of the Amendment, and I hope that the Parliamentary Secretary will be able to indicate that it will be possible to meet it in the immediate future if not now.

§ The Financial Secretary to the Treasury (Mr. Assheton)
I understand the reasons for which my hon. Friend the Member for Walsall (Sir G. Schuster) and my hon. Friend the Member for the Forest of Dean (Mr. Price) have put forward this Amendment. My hon. Friend the Member for Walsall was right in suspecting that the Chancellor was not prepared to accept it. The Committee may recollect that on Second Reading my right hon. Friend made a reference which covers this point. Perhaps I may be allowed to quote what he said: I do not think I could agree to any provisions which enabled firms to claim relief merely in respect of funds set aside or reserved, either for research or for industrial development. It is a vital part of my proposals that the relief to be given should apply when the money is actually used, either for research or for replacement of equipment, or new buildings, or whatever it may be."—[OFFICIAL REPORT, 23rd May, 1944, Vol. 400, c. 698.] Although it may strike the Committee that the proposal which my hon. Friend has made is a constructive one, it is one which the Chancellor has considered carefully. I am sorry he was not here to hear the speeches made by my hon. Friends, but I will draw his attention to them.

§ Sir G. Schuster
I got the answer I expected, but I want to ask my right hon. Friend not to dismiss this point too lightly, I appreciate that the Chancellor does not want to give relief until the money is actually used, but the point is that, when the time comes when a firm is able to use the money, it might not have it. The Chancellor must take this into account if he wants to fulfil the purposes he indicated in his Budget speech. He must take account of the timing of the allocations which can be made. It is no use being allowed to make deductions from profits except at times when profits are available. 2020 We thought that we offered a way in this Amendment. I see his point that money put to ordinary company reserves cannot be treated as expenditure. But what we propose is that the money should be deposited with the Revenue authorities and earmarked for certain purposes so that it would be impossible to spend it for other purposes. I cannot see why on the merits the Chancellor should not accept that. I recognise that it is no use pressing the Amendment now, but I can only repeat my request to my right hon. Friend to have this matter considered when he comes forward with his special legislation later in the year.

§ Sir W. Wakefield
May I ask the Financial Secretary whether the words in Subsection (1), "a person while carrying on a trade," include a man who carries on a profession of research and then, as a result of his research, makes an invention? A man who does research might make an invention which might be related to one trade. He might then carry out research of a different character and make an invention related to another trade.

§ The Deputy-Chairman (Mr. Charles Williams)
The hon. Gentleman has put his question, but he must not go back to an Amendment on a previous Clause.

§ Sir W. Wakefield
The point with which the Chancellor dealt on Clause 26 was in connection with allowing as expenditure contributions towards research bodies. I am making a different point. St is whether an inventor who carries out research for inventions which he makes as a profession is included in Clause 27 if he makes inventions which relate to a number of trades.

§ The Deputy-Chairman
That question can be asked, but when the hon. Gentleman began to develop it, I thought he was going back to the question of what is a profession.

§ Sir W. Wakefield
I only wanted to make clear the point I was trying to raise.

§ Mr. Assheton
It is not easy without going outside the Ruling to say much more. Normally, I do not think such a 2021 point would be covered, but it must depend on the facts of the individual case. I can conceive circumstances in which it would be covered. If a man is carrying on business as an inventor, there might be circumstances in which he would be brought within this Clause, but it would depend on the circumstances and it would not be possible to make rules.

§ Sir W. Wakefield
Will the Financial Secretary look into this to see whether, on the Report stage, an Amendment could be put in to cover the point if it is not already covered? Otherwise, the principle which the Chancellor laid down in his Budget speech and on the Second Reading of the Finance Bill will not be fully implemented.