§ Mr. Maurice Macmillan
I beg to move Amendment No. 42, in page 33, line 25, leave out from 'person' to 'are' in line 28 and insert:'on the provision of second-hand machinery or plant if capital expenditure on providing the machinery or plant was incurred by another person before the said 27th October and—
- (a) he and that other person'.
§ Mr. Macmillan
These Amendments slightly modify the starting rules for the new code of capital allowances.
The general rule is that the new code applies to capital expenditure on plant and machinery incurred on or after 27th October and that this is so whether the plant and machinery is then new or second-hand. There is a need, therefore, to safeguard the Exchequer against artificial transactions in second-hand assets, and subsection (2) of the Clause provides those safeguards.
The intention is that if second-hand plant and machinery is bought on or after 27th October in an arm's length 1415 transaction, the new allowances will apply. But if the plant or machinery on which the expenditure is being written down at the old rates is transferred to an associated or connected company, they will not apply.
However, further examination of the Clause has revealed some minor defects. As it was drawn, a third company could be wrongly deprived of the benefit. Also, subsection (2) did not cover the possibility that a company owning machinery bought before 27th October might transfer it, not on an outright sale but by some other transaction, such as hire purchase, and it was necessary to bring hire purchase in as well as outright sale. Amendments Nos. 42 and 43 remedy these defects.
Amendment No. 44 deals with another point. The new allowances do not apply where plant or machinery is being bought on hire purchase and where the first instalment has been incurred and the asset brought into use before 27th October, 1970, by the hire purchaser. But subsection (3), which provides for this, goes rather too far. It could unnecessarily deprive the hire purchaser of a second-hand asset of the new allowances because someone else had had it in use before 27th October. That is clearly wrong and Amendment No. 44 corrects it.
These are tidying-up Amendments which restore to the Clause the function it was originally supposed to have. Amendment agreed to. Amendments made: No. 43, in page 33, line 30, leave out from 'the' to 'is' in line 31 and insert:'tranaction under which the first-mentioned expenditure is incurred, or with respect to transactions of which it'.Amendment No. 44, in page 33, line 41, leave out 'has not been used before' and insert:'is first brought into use by that person on or after'.—[Mr. Maurice Macmillan.]