(2) After Section twenty-nine of the Income Tax Act, 1943, there shall be inserted the following Section:—
29A.—(1) Notwithstanding the provisions of Subsection (1) of Section seven of this Act, if an allowance falls to be made under Section fifteen of the Finance Act, 1937, for the last year of assessment before that in which the appointed day falls in respect of any premises the expenditure on which can be the subject of an allowance under this Part of this Act, an allowance shall, by virtue of this Subsection, be made under and subject to the provisions of the said Section fifteen in respect of those premises for the year of assessment in which the appointed day falls:
Provided that where, for the purposes of this Part of this Act, account has to be taken of any allowances under the said
Section fifteen made for any year of assessment before that in which the appointed day falls, any allowance made under this Subsection shall be deemed to be an allowance for the last year of assessment before that in which the appointed day falls.
(2) The preceding Subsection shall be deemed always to have had effect and such relief shall be given by repayment or otherwise as is necessary to give effect to the Subsection."—[Mr. Eccles.]
§ Brought up, and read the First time.
§ Mr. Eccles.
I beg to move. "That the Clause be read a Second time."
I hope that I can explain that this Clause does not impose a new charge. Certainly, the Committee will see in a very few minutes that that is not the intention of those who drafted it. This obscure but important point need not, I hope, detain us very long. In my Clause I seek to remedy a small grievance that has arisen in connection with the Income Tax Act, 1945. The Committee will remember that Part III of that Act dealt with allowances which could be claimed by the mining industry, and this new Clause refers only to allowances in connection with the mining industry. Before the coming into force of the Income Tax Act, 1945, mining companies had been able to claim on certain buildings an allowance under Section 15 of the Finance Act, 1937, which was known as the mills, factories allowance. The new Act withdrew that allowance and substituted a new system of annual allowances, and by reason of Sections 7 and 13 of the 1945 Act a gap was left in 1946–47 during which neither the old nor the new allowances could be claimed in respect of buildings which fell to be dealt with under Part III of the 1945 Act. I believe it to be purely a drafting error in the 1945 Act, and this is borne out by an explanatory memorandum which was issued by the Inland Revenue entitled "Notes on Allowances for Industrial Buildings," in which it is said, on page 14:Where in the case of a building that has ranked as a mill, factory, etc., allowance can be given under the mining (Part III) or agricultural works (Part IV) provisions of the Income Tax Act, 1945, any mills, factories, allowance will cease after 5th April, 1946 (Section Thirteen, Income Tax Act, 1945) and the new system of mining or agricultural allowances will apply as from 1946–47.From that quotation it is quite obvious that the Revenue authorities were under the impression that the new system of 1842 allowances would take effect from 1946–47, but as it turned out the new allowances do not come into force until 1947–48. I feel, therefore, that the taxpayer ought to have the option of continuing to claim the old allowance until the time when the new allowances come into effect. My Clause is drafted in the hope of putting this small mistake right, and I have moved it in order that the Solicitor-General may look into this point.
§ 6.0 p.m.
§ The Solicitor-General (Sir Frank Soskice)
You did invite the Committee Mr. Beaumont, to indicate if it was the case that this Clause imposed a charge. As I read it, and especially after hearing what the hon Gentleman has said, I submit to you that it undoubtedly does impose a charge and is therefore out of Order. It imposes a charge in this way. It would seek to restore an allowance which was hitherto provided by Section 15 of the Finance Act, 1937. The Income Tax Act, 1945, provides, briefly, for a system of annual allowances in order to enable expenditure on buildings and machinery to be written off. It then provides that in the event of a sale of the enterprise which includes the buildings or the machinery there shall be a balancing charge—that is to say a charge upon the taxpayer—in certain circumstances. That charge is made if the following takes place. It is made under Section 28 of the Income Tax Act, 1945, if the sale price which is received upon the sale of the venture exceeds what is defined as the residue of expenditure. Inasmuch as the effect of this new Clause would be, by reintroducing the allowance under the 1937 Act, to reduce the residue of expenditure, the consequence would be that there would be a balancing charge equivalent to the difference between the sale price and the reduced residue of expenditure if the expenditure was less than the sale price. I submit that that undoubtedly creates an additional charge and that the Clause is out of Order.
I am satisfied that the proposed new Clause is out of Order and it must therefore be withdrawn.
§ Motion and Clause, by leave, withdrawn.
§ First and Second Schedules agreed to.