§ (1) Where a sewerage authority in the United Kingdom incurs expenditure on the provision of an asset to be used in the treatment of trade effluents, then, in relation to any contribution of a capital sum made to that expenditure, subsection (3) of section 332 of the Act of 1952 (by virtue of which, in a case where the person receiving a capital sum would, apart from subsection (1) of that section, qualify for capital allowances in respect of his expenditure, the contributor is treated for the purpose of investment, initial and annual allowances as if his contribution had been expenditure on an asset provided for the purposes of his trade) shall apply as if such allowances fell to be made to the sewerage authority in respect of the expenditure as apart from subsection (1) of that section would fall to be made if the asset were to be so used for the purposes of a trade carried on by the sewerage. authority.
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(2) in this section—
sewerage authority" means a public body having power under any enactment relating to the public health to construct and maintain sewers;
trade effluents" means liquid or other matter discharged into public sewers from premises occupied for the purposes of a trade.
§ (3) This section shall apply only where the contribution was made, and the expenditure in question was incurred, after the 31st May. 1963. —[Mr. Hirst.]
§ Brought up, and read the First time.
§ Mr. HirstI beg to move, That the Clause be read a Second time.
This is quite a simple matter, although like all these Clauses it sounds rather involved. I can explain it quite shortly. Under the Public Health Acts, 1937 and 1961, heavy expenditure can be required on industry to put its trade effluents in a form which complies with these Acts. That expenditure can be met in two ways. One method is that the company concerned itself puts in the appropriate plant and obtains the normal capital allowance under the provisions of the finance legislation by which, if I am correct, it can write off about 91 per cent. over the first five years.
The second method also adopted in compliance with the Acts is for the company to make a contribution to its local authority which then puts in the necessary plant and owns the plant. Since the company does not own the plant, it automatically follows that it gets no capital allowance. Section 332 of the Income Tax Act, which assists traders in similar circumstances elsewhere, does not apply. Such a company is faced with paying a capital sum—I want to underline that quite clearly—to the local authority in respect of which it gets no tax relief.
I suggest that this an anomaly which may he put right by the provisions in this Clause. It is a technical point but an easy one and there is nothing revolutionary about it. Irrespective of who owns the plant, capital contributions towards the cost of disposing trade effluent will attract relief on investment initially and annual allowances.
§ Mr. BarberThe purpose of this new Clause is to grant capital allowances to a trader for a capital contribution made 1687 by him to a local authority towards the capital cost of works provided by the local authority to deal with his trade effluent. A local authority may impose conditions under which it will dispose of the trade effluent. Sometimes it makes a charge on a gallonage basis. In that case, no question arises because the charge is a revenue outgoing of the trader, and is allowed as a deduction in computing his profits in the ordinary way.
Where the amount of effluent is so great that a local authority may have to incur expenditure in providing treatment plant in excess of its ordinary needs, it may wish to have the trader meet the whole or some part of this expenditure. If called on, a trader may make a lump sum capital contribution to this expenditure. It is true that a taxpayer would get no relief of any sort. There is a provision in Section 332 of the Income Tax Act, 1952, to ensure that where one trader makes a contribution to the capital expenditure of another trader who is entitled to claim capital allowance, the trader-contributor—if I may so describe him—gets the capital allowance on his contribution and the allowances of the other traders are reduced by reference to the contribution. This would be of no avail to a trader-contributor to capital expenditure on trade effluent because a local authority is not engaged in a trade in relation to its sewerage functions.
I agree that this is an anomalous situation which would be corrected by the Clause. The cost of this proposal is difficult to estimate. It would be negligible in the first year, but might rise to about £3 million in due course. Eventually, it would fall to about £1 million. I agree with my hon. Friend that it is something which ought to be put right. The Clause would do this and I 1688 am, therefore, delighted to advise the Committee to accept it.
§ Mr. DiamondIt goes without saying that we welcome this Clause also and would like to congratulate the hon. Member for Shipley (Mr. Hirst) on his perspicacity and understanding of the situation. A year or two ago one of his colleagues had the good fortune not only to perceive a defect in our taxing Acts, but to be enabled to draft a Clause in such a way that it was accepted exactly as drafted. We should all like to congratulate the hon. Gentleman on once more succeeding in being not only accurately informed about the state of the law—as he so often is—but on having the capacity to draft the necessary Amendment—something which hon. Members on this side find a little difficult—with such precision as to be acceptable by hon. Members on both sides of the Committee.
§ Mr. John Wells (Maidstone)May I ask my hon. Friend for an assurance that for the purpose of this new Clause farmers are included in the term "traders"? I ask this because the provisions in the Rivers (Prevention of Pollution) Act, 1961, which resulted from a Private Member's Bill promoted by my hon. Friend the Member for the City of Chester (Mr. Temple), could conceivably have an adverse effect on the farming community unless help is given to them. If we can see help for the farmers resulting from this Clause, I shall be doubly grateful to my hon. Friend for accepting it.
§ Mr. BarberFarmers are traders for the purposes of this Act.
§ Question put and agreed to.
§ Clause read a Second time and added to the Bill.