HC Deb 07 July 1959 vol 608 cc1125-8

(1) Subject to the provisions of this section, where after the seventh day of April, nineteen hundred and fifty-nine, a person incurs capital expenditure on the provision of a ship the expenditure shall not be prevented from being treated for investment allowance purposes as incurred on the provision of a new asset by the property in the ship or any part thereof having previously passed to a person other than the person incurring the expenditure if the ship has not been taken over from the builder by any such other person. (2) The foregoing subsection shall not apply if any person other than the person incurring the expenditure has become entitled to an investment allowance in respect of the ship or would have become entitled to such an allowance by virtue of this section but for the limitation contained in the foregoing subsection to expenditure incurred after the said seventh day of April: Provided that where such an other person has, or would have, become entitled as aforesaid as respects part only of his capital expenditure on the provision of the ship, the foregoing subsection shall apply, but the amount of expenditure in respect of which an investment allowance may be made by virtue of this section shall not exceed the amount qualifying for an investment allowance apart from any operation of the said limitation, reduced by the amount of the said part of the other person's capital expenditure. (3) Where rights under a contract for the provision of a ship are assigned after the ship has been begun, and either—

  1. (a) the assignor is a body of persons over whom the assignee has control (within the meaning assigned to that expression by subsection (1) of section three hundred and thirty-three of the Income Tax Act, 1952), or the assignee is a body of persons over whom the assignor has such control, or both the assignor and the assignee are bodies of persons and some other person has such control over both of them or
  2. (b) it appears with respect to the assignment, or with respect to transactions of which the assignment is one, that the sole or main benefit which, apart from the provisions of this subsection, might have been expected to accrue to the parties of any of them was the obtaining of an increased investment allowance.
then in relation to the making of any investment allowance falling to be made by virtue of this section no part of the consideration for the assignment shall be treated as expenditure incurred on the provision of the ship, but nothing in this subsection shall affect the consideration for a sale to the assignee of so much of the ship as is in existence before the assignment. References in paragraph (a) of this subsection to a body of persons include references to a partnership. (4) The Fourteenth Schedule to the Income Tax Act 1952 (which, where there is a sale between a buyer and a seller who are associated, makes special provision as to the price at which for income tax purposes the property is to be taken to have been sold), shall not operate so as to increase the amount of any investment allowance falling to be made by virtue of this section. (5) Expenditure shall not be treated for the purposes of this section as having been incurred after the said seventh day of April by reason only of subsection (2) of section two hundred and seventy-nine of the Income Tax Act, 1952 (which relates to expenditure incurred by a person for the purposes of a trade before he begins to carry it on).—[Mr. Simon.]

Brought up, and read the First time.

Mr. Simon

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

We discussed this matter in Committee on an Amendment moved by my hon. Friend the Member for Southampton, Test (Mr. J. Howard), and I do not expect that hon. Members will want me to go again through the technicalities, which were well rehearsed then both by my hon. Friend and myself.

The short point is that there is one type of contract, out of four possible types of contract, for the purchase of a ship where the investment allowance is not obtainable, either directly by a transfer of the investment allowance from the original purchaser of the ship to the second purchaser, or indirectly through being reflected in the price, by the second purchaser in this country. It arises from a technicality in the law whereby the investment allowance is obtainable only if the ship is new and not second-hand. As I pointed out in Committee, that means unused and not second-hand and since some meaning must be given to "unused" which is different from second-hand, the investment allowance would not be obtainable in such a case.

The purpose of the Clause clearly commended itself to the Committee when we discussed it. It failed on a technical point, which I pointed out to the Committee and to my hon. Friend, and we believe that the Clause as now drafted puts the matter right.

Mr. Frederick Willey (Sunderland, North)

I welcomed the effort of the hon. Member for Southampton, Test (Mr. J. Howard), and, equally, I welcome the draftsmanship for which the Financial Secretary to the Treasury may claim credit in the new Clause. It is a useful new Clause, and it will help both shipping and shipbuilding. I am sorry that the Financial Secretary did not exercise the virtuosity which he displayed when we were discussing this before, but there is a simple and lucid explanation of the purpose of this Clause to be found in the OFFICIAL REPORT, to which I would refer any hon. Member who is in any difficulty about it.

While I am sure that the new Clause will help the industry, I do not want to be thought ungenerous or ungrateful, but I hope, at the same time, that the Government are giving serious thought to the very real difficulties of both these essential industries. I will not transgress any further, having drawn the attention of the Financial Secretary to the difficulties facing these industries. Certainly in the shipbuilding industry we appreciate this as a valuable concession.

Mr. John Howard (Southampton, Test)

May I say a few words of appreciation to my right hon. Friend the Chancellor of the Exchequer for the trouble he has taken in drafting the necessary new Clause and in finding the precise form of words to deal with this anomaly? I am quite certain that the rectification of this discrepancy will be of assistance in the shipping industry, and that all four types of contract will now be treated in the same way, and that, therefore, shipowners who wish to add a new ship to the British merchant fleet will be able to receive the investment allowance in future.

Mr. Douglas Marshall (Bodmin)

As I supported this proposal originally in Committee, I, too, wish to thank the Chancellor, and at the same time the Treasury officials who have managed to find a form of words to cover the principle to which the Committee agreed.

Question put and agreed to.

Clause read a Second time and added to the Bill.

Bill reported with Amendments; as amended (in Committee and on recommittal), considered.