HC Deb 14 June 1951 vol 488 cc2526-31

Subsection (1) of section twenty-four of the Finance Act, 1947 (which allows relief from income tax and the profits tax for certain capital expenditure on rehabilitation), shall have effect as if in the proviso thereto (which, as set out in section thirty-three of the Finance Act, 1948, extends in certain cases till not later than the end of March, nineteen hundred and fifty-two, the period within which the expenditure must have been incurred if the relief is to be given) for the words "the end of March, nineteen hundred and fifty-two," there were substituted the words "the end of March, nineteen hundred and fifty-four."—[Mr. J. Edwards.]

Brought up, and read the First time.

3.56 p.m.

The Economic Secretary to the Treasury (Mr. John Edwards)

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

The purpose of this Clause is to extend from 31st March, 1952, to 31st March, 1954, the time limit within which capital expenditure on post-war rehabilitation must be carried out in order to qualify for allowance as an expense in computing profits for the purposes of Income Tax and Profits Tax. Hon. Members will have noted that there is, in the name of the hon. Baronet the Member for Sutton Coldfield (Sir J. Mellor), the suggested new Clause concerning the extension of time in relation to relief from excess profits tax for terminal expenses. That Clause has points in common with this one, and it might be convenient if I say now that I hope we shall be able to meet them when we come to it.

Perhaps I should point out that in this Clause reference is made only to rehabilitation costs of a capital nature. The reason is that repairs, and other rehabilitation costs of a revenue nature, are allowable expenses for Income Tax and Profits Tax on ordinary tax principles without any question of time. Originally, under the Finance Act, 1947, the time limit for carrying out this work was the end of 1949. It was later extended by the Finance Act, 1948, to the end of March, 1952. In view of our present economic circumstances, more particularly of the re-armament programme, we think it is reasonable to have a further extension of two years within which these costs may be brought to account.

Mr. Selwyn Lloyd (Wirral)

I desire to say a word or two on this Clause because it was in answer to Amendments which I put upon the Order Paper in 1948 that certain concessions were made on these matters. As the Economic Secretary has said, this represents a concession which we on these benches feel is reasonable in the circumstances of the day.

There are one or two questions I wish to ask. I see that in the 1947 Act rehabilitation costs include expenditure on the removal of works designed to afford protection from hostile attack. Paragraphs (b) and (c) of the subsection in question deal with the cost of moving businesses from one place to another and the cost of adapting plant and machinery. I take it that it is only rehabilitation work related to the last war which is covered by the Clause.

Mr. J. Edwards indicated assent.

4.0 p.m.

Mr. Lloyd

Of course, a certain amount of this sort of thing is going on at the present time in connection with possible hostile attacks which nobody desires or, indeed, anticipates. I should like to know whether the Government have in view any similar sort of work of that nature. That is, perhaps, a rather general question which may be outside the scope of the new Clause but, in view of the width of the definition, I wondered whether work to be carried out will come within the terms of the definition.

The second point I should like to raise is whether the hon. Gentleman could tell us what is the extent of this problem at the present time. One rather likes to follow up these matters when one has been trying to watch them over a period of years. Have many of these statements of particulars been coming in? Is there a great deal more work to be done. Does he consider that this concession will see the end of it? Can he give a little further information about how this matter has been progressing since we first dealt with it in the Finance Acts of 1947 and 1948?

Mr. Ian L. Orr-Ewing (Weston-super-Mare)

Like everyone else, I am glad that this concession has been made, but I cannot help wondering whether a concession made in this form at this stage is quite as satisfactory as it would have been if the same concession had been made two years ago. I would take the question a little further: is the present form of the concession altogether wise? I am not quite sure that I like to see a specific date limit in this concession. I cannot see the point of having it.

Surely it would have been wiser if something had been inserted to make it quite clear that before the allowances were brought to an end, or before the period within which they would be made was brought to an end, notice of either two or three years would be given. That would have dealt with the position on a far more satisfactory and commonsense basis. After all, the reason the extension is given at all is the practical difficulty, to a large degree, of having the necessary work performed.

Are we now trying to think as we should have been thinking in different circumstances, and certainly as my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) was thinking two years ago? In 1951 we cannot afford to think in terms of 1948–49. I am not at all sure that we shall not confuse the position as far as it concerns work which various people may be called upon to perform if the national situation does not improve. What is the position, for instance, if some of the work has been done but, in view of the national position, it has to be undone and the war-time condition of building reinstituted; or where the buildings are taken and have to be dealt with in a suitable way to meet storage, manufacturing, conditioning and packaging requirements for stockpiling of food or stores?

I should have thought that, with the possibility of that sort of thing happening in 1951, it would have been much wiser to have left out altogether any specific date of termination and to have dealt with the matter the other way round—to have given an undertaking that two or three years' notice would be given. I ask that that aspect of the matter be considered and that that form be adopted instead of the form of naming a specific date, such as is contained in the Clause.

Mr. I. J. Pitman (Bath)

May I join in the thanks which have been expressed for this concession, which will be greatly appreciated and which is, indeed, justly due? In the meantime I should like the Economic Secretary to consider whether the date to which this extension will be allowed should continue to be limited—and that arises from what my hon. Friend the Member for Weston-super-Mare (Mr. Ian L. Orr-Ewing) has just said. Will he not consider bringing together more closely the accounts which the Inland Revenue, for computations of tax, compel companies to keep and the accounts which the chartered accountants certify as being a correct view of the company's affairs?

The position of the chartered accountant has been very greatly strengthened as a result of the last Companies Act, and I should have thought that the Treasury were now in a position—even if they were not in the position before—to say definitely that they are prepared to accept as correct the sets of accounts which are prepared and certified as correct. If the chartered accountant says that certain expenditure of this character is of a revenue nature, and allows that amount to be put to revenue expenditure and not to capital expenditure, it seems to me that the Treasury and the Inland Revenue have all the safeguards that they need in such a case.

It seems fantastic to me that companies should be keeping, under the expressed instructions of the Inland Revenue, two sets of accounts—one which is true and one which is not true but which must be kept in accordance with some very out-of-date regulations maintained by the Inland Revenue. If one set of accounts could be kept, recognised as being a true picture of the affairs of the company at that date, it would be clearly right for the Inland Revenue to base their tax computations upon those accounts and there would be no need for additional sets of accounts for such computations.

In the meantime, this is a plea for an extension of the terms of this concession so that it may run not in terms of years but in terms of correctness and validity by the certification of a competent audit. Will the hon. Gentleman consider that?

Mr. J. Edwards

I will answer very quickly, dealing first of all with the point made by the hon. and learned Member for Wirral (Mr. Selwyn Lloyd). I agree with his view about the works which are covered here; we are concerned with work required to be done as at 31st December, 1946. As for the general point he made, he must leave that with me, for I need notice of such a point. I have no definite information, but I am advised that there is not much more work still to be done. My right hon. Friend felt, in all the circumstances, that it would be right to meet the arguments advanced by putting down this new Clause. I think two years will probably be long enough, but if it were found that it was not long enough, then of course the matter could be reconsidered.

As to the point raised by the hon. Member for Bath (Mr. Pitman), in a sense that arises only indirectly from the Clause. If he will leave it with me, I will look at the matter and let him know my views.

Lieut.-Commander Gurney Braithwaite (Bristol, North-West)

I am sure we are grateful for the Economic Secretary's extremely painstaking reply. In the year 1951 it is a little difficult to discuss a rather technical matter which received so much attention two years ago. I have before me the OFFICIAL REPORT of the discussion on Sir Stafford Cripps' first Budget, which was later embodied in the Finance Bill, 1948, when the Paymaster-General of the day, now the Minister of Health, said that the purpose of the new Clause moved on that occasion was to extend to March, 1952, the time limit in which capital expenditure on post-war rehabilitation must be incurred if it were to qualify for relief from Income Tax and Profits Tax, and he paid a tribute to questions by my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), who was as active then as he has been this afternoon.

I shall not weary the Committee with long quotations when many hon. Members' thoughts on money are elsewhere. I understand that the quadruped favoured by many on this side of the Committee ran into second place, which must not be taken as an augury for a future political event. The present Minister of Health said on that occasion that the large bulk of the particulars had already been supplied by March. That was in 1948. I wonder whether the Economic Secretary can tell us what the cost of these operations has been to date. I do not know whether he has the figure, but it would be of great convenience to give it, perhaps in answer to a Question on the Order Paper, because it seems that without that information the story is incomplete.

Mr. J. Edwards

I will see whether I can do that.

Question put, and agreed to.

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