Clause 21.—(AMENDMENTS AS TO ALLOWANCES, ETC., IN RESPECT OF MACHINERY OR PLANT AND PATENT RIGHTS.) (Hansard, 19 May 1952)

§ Mr. Austen Albu (Edmonton)
It would no doubt be inappropriate to discuss the Clause at the moment because the whole of the Clause is contained in a Schedule which occupies seven pages. I should like to ask the Solicitor-General to confirm what appears from a reading of the Schedule to be the case, that this is simply a Clause to close up a loophole and prevent certain possibilities of tax evasion in these extremely complicated matters of additional allowances, depreciation allowance and subsequent balancing charges. No doubt we shall be debating the Schedule later, but I ask now whether it would be possible to simplify that extremely complicated Schedule. Perhaps the right hon. and learned Gentleman can also confirm what the Clause is intended to do.

§ The Solicitor-General
The hon. Member's impression of what the Clause is intended to do is quite correct; this is a loophole-stopping Clause on which the 176 Schedule depends. As the hon. Member knows, when one wants to make alterations in the tax law to stop loopholes the alterations are likely to be complicated.

§ Mr. F. Harris
There is an important point upon which the Minister may be able to give an undertaking, and which has been exercising the consideration of members of our local chamber of commerce. As we understand it, expenditure on the right to acquire future patent rights will be regarded as an expenditure on the purchase of patent rights as from the commencement of the Finance Act, 1952. The Board of Inland Revenue, according to our information in Croydon, has, prior to the Clause being put down, consistently argued that the acquisition of future patent rights was a capital expenditure not liable for taxation purposes and more often than not because the payment had been made after a provisional application for a patent had been made but before the final specification had been purchased.
In view of the attitude of the Board in this matter, I wonder if the Chancellor might be prepared to give an undertaking that he will instruct the Board to interpret the old provisions of the Income Tax Act, 1945, up to the date of the commencement of the Finance Act, 1952, on the basis indicated as now being acceptable by the Board within the provisions of paragraph 16 of the Sixth Schedule.

§ The Solicitor-General
Under the existing law a payment in respect of a sum laid out to purchase patent rights is charged to tax in the hands of the recipient. There is no similar provision in regard to a capital payment in respect of an application for a patent. This Clause seeks to remedy that difficulty. The Schedule is not being applied with retrospective effect and the main modifications will come into effect after the commencement of the Act, that is to say after the date when the Bill is passed.

Mr. Glenvil Hall
Will the right hon. and learned Gentleman say what would comprise an "event" coming into operation after the commencement of the Act? Would it mean that the patent would have to be applied for when a certain stage had been reached? Or must it have got much further than that—must the patent actually have been applied for by the time the Act comes into operation? 177 I must add, finally, that I am surprised at an hon. Gentleman opposite suggesting we should here legislate retrospectively.

§ The Solicitor-General
I must resist the temptation to try and explain the precise legal definition of the word "event" It is beyond my capacity.