§
'(1) After subsection (1) of section 85 of the Capital Allowances Act 1968 (allowances in respect of contributions to capital expenditure) there shall be inserted—
(1A) Subsection (1) above shall not apply where the person making the contribution and the person receiving it are connected persons within the meaning of section 533 of the principal Act.
§ (2) This section applies in relation to contributions made after 8th July 1976'.—[Mr. Denzil Davies.]
§ Brought up, and read the First time.
§ 5.30 p.m.
§ Mr. Denzil DaviesI beg to move, That the clause be read a Second time.
The clause is intended to prevent the avoidance of balancing charges in certain circumstances. It amends the effect of Clause 37, which is an anti-avoidance measure relating to balancing charges. Clause 37 defines more closely the disposal value to be taken into account by providing that where there have been transactions between connected persons, the greatest expenditure incurred by any of those persons shall be taken into account in determining the balancing charge.
In its observations on the Bill the Revenue Law Committee of the Law Society pointed out that Clause 37 failed to deal with the position where part of the cost of purchasing an asset was met by a contribution from another person—for example, where it was acquired by a subsidiary and the parent company made a contribution to the cost. The Law Society recommended that the clause should be amended to enable the capital expenditure incurred by two or more persons to be aggregated. The clause follows the advice of the Law Society and tightens the anti-avoidance provisions.
We are grateful to the Revenue Law Committee of the Law Society for drawing the matter to our attention. We are introducing the new clause to prevent the object of Clause 37 being avoided by contributions by connected persons and thereby defeating the purpose of the legislation.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.