HC Deb 15 July 1946 vol 425 cc893-6

(1) Subject to the provisions of this Section, if any person who carries on a trade or business makes a claim for relief under this Section and proves—

  1. (a) that a building provided by him for the purposes of the trade or business before the beginning of the year nineteen hundred and thirty-seven was sold or demolished on or after the first day of April, nineteen hundred and forty-five, and that a building containing similar or improved accommodation 894 has, since the said first day of April, been constructed by way of replacement and used by him for the said purposes; and
  2. (b) that, if, in lieu of that sale or demolition, repairs to the building sold or demolished had been carried out, expenditure thereon would have constituted costs of deferred repairs,
he shall be entitled to require that he be treated, for the purposes of Excess Profits Tax, as having, as and when expenditure is incurred by him on the construction of the building provided by way of replacement, incurred costs of deferred repairs up to the amount specified in Subsection (2) of this Secton, and Section thirty-three of this Act shall, where appropriate, and subject to any necessary adaptations, apply accordingly.

(2) The said amount is an amount equal to—

  1. (a) so much of the expenditure which, if repairs to the building sold or demolished had been carried out immediately before the sale or demolition, would have been incurred on those repairs as would have constituted terminal expenses; or
  2. (b) the net cost of the building provided by way of replacement,
whichever is the less.

(3) Where relief is given by virtue of this Section, then, for the purposes of paragraph 3 of Part I of the Seventh Schedule to the Finance (No. 2) Act, 1939, and of Section fifteen of the Finance Act, 1937, as applied for the purposes of Excess Profits Tax (being provisions which relate to exceptional depreciation allowances and depreciation allowances for mills, factories, etc.) and as respects all periods whether before or after the passing of this Act, the net cost or actual cost to the person carrying on the trade or business, as the case may be, of the building provided by way of replacement shall be treated as reduced by the amount mentioned in Subsection (2) of this Section.

(4) Where Section thirty-three of this Act applies by virtue of this Section and the person entitled to claim under that Section is the principal company of a group of companies, a claim under this Section shall be made by, and only by, that company.

(5) In this Section the expression "costs of deferred repairs" has the same meaning as in Section thirty-three of this Act, and the expression "net cost" has the meaning assigned to it by sub-paragraph (3) of paragraph 3 of Part I of the Seventh Schedule to the Finance (No. 2) Act, 1939.—[The Solicitor-General.]

Brought up, and read the First time.

4.15 p.m.

The Solicitor-General

I beg to move, "That the Clause be read a Second time."

This Clause, too, is one of some complexity. It also represents a concession by the Chancellor of the Exchequer to arguments which were adduced from the opposite side in Committee, particularly in the form of an Amendment put down by the hon. Member for Stockport (Sir A. Gridley). Briefly, what he proposed was that, in the case of deferment of repairs, if it were more expedient on the whole, instead of carrying our repairs, to scrap the building, machinery or plant which required repair, the person who was the owner of the building, machinery or plant in question could scrap the building, machinery or plant an claim as an allowance the amount to which he would have been entitled by way of deferment repairs had he carried them out. That is what was proposed in the Amendment. I opposed that Amendment and gave various reasons for that attitude. The main reason was that already, by virtue of the provisions of paragraph 3 of the Seventh Schedule of the Financial (No. 2) Act. 1939 and certain other provisions, virtually the same concession was already granted by the law as it stood. I did, however, point out that neither that Schedule nor any other provision of Income Tax legislation applied to buildings as distinct from plant and machinery which were acquired before 1937. Paragraph 3 of the Seventh Schedule of the Finance (No. 2) Act, 1939, applied to plant, buildings and machinery acquired after 1937. Similarly, Rules 6 and 7 of Cases 1 and 2, Schedule D of the Income Tax Act of 1918 applied only to plant and machinery and not to buildings whether acquired before or after 1937. The result was there was a gap in existing legislation in so far as buildings acquired before 1937 were concerned.

This Clause is designed to fill that gap in the sense in which it was sought to be dealt with by the Amendment to which I have referred. It does, in other words, provide in respect of buildings acquired before 1937, that if the owner of the buildings, instead of carrying out deferred repairs, scraps the buildings on the ground that that is more economical to do so, he shall be entitled to claim, as an allowance, the amounts which he would have been entitled to claim as deferred repairs allowance, proportionate to the expenditure which he incurred in replacing the building. For example, supposing a man scraps a building and replaces it with a new building at a cost of £100,000. If instead of scrapping that building he had repaired it and was entitled to an allowance of £70,000 he would still be entitled to that allowance in respect of the expenditure of £100,000. In making this concession my right hon. Friend feels he is giving an added stimulus to industry. He is encouraging industry to scrap obsolete buildings, and he is going a long way to meet the point embodied in the Amendment put down by the hon. Member for Stockport.

Sir A. Gridley

I think the Chancellor has fully met the point I raised, and industry ought to be satisfied with this provision

Question put, and agreed to.

Clause read a Second time, and added to the Bill.

Mr. Speaker

The next new Clause (Amendment of Income Tax Act, 1945, and Finance Act, 1944), standing in the names of the hon. Member for Stockport (Sir A. Gridley) and the hon. Member for Edgbaston (Sir P. Bennett), is out of Order. The following two new Clauses, standing in the names of the same two hon. Gentlemen, can be taken together.

Captain Crookshank (Gainsborough)

When you say, Mr. Speaker, that these two Clauses may be taken together, does that mean that we can divide on them, if we wish to object to either or both of them?

Mr. Speaker

There is no reason why that should not be done.