ALLOWANCES FOR ASSETS LEASED OUTSIDE THE UNITED KINGDOM (Hansard, 13 July 1982)

§ Mr. Ridley
I beg to move amendment No. 167, in page 55, line 45, after 'effect', insert 'subject to subsection (3A) below'.

Mr. Deputy Speaker
With this it will be convenient to take Government amendments Nos. 168, 169, 170, 171, 93, and 174.

§ Mr. Ridley
The purpose of this group of amendments is to prevent certain schemes designed to achieve a tax subsidy from the United Kingdom Exchequer for assets leased overseas. Despite the new reduced rate of 10 per cent. annual writing down allowances for overseas leasing, where a lease falls foul of any of the five new conditions in the amendment no allowances are due and, if already given, are withdrawn.
I gave notice in Committee that this loophole had become apparent to us even before the ink was dry on the clauses restricting overseas lending. The amendments are designed to put that undertaking into effect. I commend them to the House.

§ Mr. Robert Sheldon
From what date would the allowances be withdrawn?

§ Mr. Ridley
The provisions apply to expenditure incurred on or after 23 June 1982, which was the date on which I announced in Committee that we intended to legislate in this way.

§ Mr. Sheldon
With the leave of the House, may I ask whether the Financial Secretary can give us any idea of the extent of transactions carried out in any of those five categories between the publication of the Bill and 23 June?

§ Mr. Ridley
I cannot give a categoric assurance that no such transactions were carried out, but I think that in this case the stable door was bolted before any horses got out. It was partly because we had seen the possibilities and partly because we heard that others had also seen them that we moved as quickly as we did and sought the leave of the House to legislate from the date on which the announcement was made. I suspect, however, that little, if any, business was written before that date.

§ Mr. Ridley
I beg to move amendment No. 89, in page 57, line 6, leave out '1984' and insert '1985'.

Mr. Deputy Speaker
With this, it will be convenient to discuss also Government amendments Nos. 90, 91 and 92.

§ Mr. Ridley
The amendment is designed to help those who would otherwise have been caught by the overseas leasing arrangements. We allowed those who have contractual obligations—at least with their suppliers if not with their lessors—to have two years' grace before the new rules applied to them, where they were under a contractual obligation. We understand that certain contracts, particularly building and civil engineering contracts overseas, might run for a longer period, so we suggest extending it a further year to make sure that those contracts that were genuinely commitments would not be disadvantaged by the changeover.
The purpose of the three related amendments, amendments Nos. 90, 91 and 92, is to allow some cross-border leasing transactions, particular sale and leaseback, that were arranged before Budget day and completed before 18 July 1982, to qualify for 25 per cent. writing-down allowances, instead of the new lower rate of 10 per cent. allowances. The difference is between sale and leaseback rather than leaseback transactions and the purpose is to ensure that no one is disadvantaged by the transaction that we introduced in the Budget.

§ Mr. Robert Sheldon
What is the cost of amendment No. 89?

§ Mr. Ridley
I do not have a figure available but I do know of two contracts—it would not be proper to reveal their nature—that were genuine undertakings and that would have caused a large loss for those who undertook the contracts and would have to renege upon them. The cost difference between the two treatments of leasing would be very small and depends upon whether the lessor, the bank, would have found some other way of sheltering its profits had this amendment not been put down or whether it would have found something else to lease instead. One can safely say that the cost is minimal.