BUSINESS EXPANSION SCHEME (Hansard, 11 July 1984)

§ Sir William Clark
I beg to move, That the clause be read a Second time.
This new clause need not detain the House for long. It concerns a simple but most important point. We have been speaking about the shipping industry, and we have passed the capital allowances for shipping, so there is no point in going back over those arguments. However, I think that all hon. Members, including my hon. Friend the Minister, will agree that in future the shipping industry will have a cash flow problem that is worse than the one that it had before the Budget.
1253 I shall not rehearse the arguments as to whether the industry should have that problem, but we could eliminate an anomaly and at the same time help the shipping industry. The Minister will recollect that the letting of ships on charter is excluded from the business expansion scheme. I cannot see why shipping, which is a high-risk industry, with harsh overseas competition, particularly from the Norwegians, should be disadvantaged in this way. I do not know whether my hon. Friend is aware that in Norway there is a scheme, similar to our business expansion scheme, that is suitably tailored for the Norwegian shipping industry. Secondly, our shipping industry will have more competition not only because of its cash flow increase, but because it will be competing against the Norwegians who have a scheme similar to the business expansion scheme.
I assure my hon. Friend that there is no question of my trying to create a loophole whereby people can avoid tax. The regulations for the business expansion scheme, if it were accepted for the shipping industry in principle, could be so drafted that only genuine shipping activity would qualify for the scheme. My hon. Friend should consider this, because, even if he cannot undertake to do it this year, some hope ought to be held out to the shipping industry. He will recollect that I raised this question in Committee, and either he or his hon. Friend the Financial Secretary said that they were considering the business expansion scheme.

§ Mr. Hayhoe
There is a wide range of eligible trades under the business expansion scheme, but, as with its predecessor, the business start-up scheme, certain trades are excluded. A company is not eligible, for example, if its trade consists to a substantial extent in dealing with land, shares, commodities or banking, insurance and other financial activities. Another of the excluded trades, as my hon. Friend has said, is leasing and letting assets on hire, which includes letting ships on charter. The purpose of the clause is to remove this exclusion on ship-chartering from the scheme. The underlying aim of the scheme is to promote growth in activity, including jobs in the small firms sector. The scheme is also for trades where the risks to the investor to some extent are commensurate with the generous level of relief. Certain trades are excluded, not because they are considered in any sense to be undesirable or undeserving, but simply because they do not fit easily with the underlying aims.
To qualify, a company must carry on its trade wholly or mainly in the United Kingdom. As indicated in the statement of practice issued by the Inland Revenue, this is interpreted to mean that at least 50 per cent. of the activities of the trade taken overall should be in the United Kingdom. My hon. Friend, I am sure, will acknowledge that it will be difficult to meet this objective in the case of a shipping company.

§ Sir William Clark
I am afraid that I cannot accept that, because the coastal shipping would qualify under the 50 per cent. condition. While I appreciate that the present rules of the business expansion scheme do not allow for this, I am endeavouring to extend the rules.

§ Mr. Hayhoe
I understand well what my hon. Friend is doing. He seeks to change the rules so as to include shipping where it is at present excluded. When he 1254 interrupted me—and I gave way—I was acknowledging that it applied particularly to exclusion when the ships were engaged mainly or wholly in third country trade. The condition of having 50 per cent. of the activities of the trade within the United Kingdom boundaries would then clearly not be met. I understand that industry representatives have suggested that, to qualify, a company's ships should be registered in the United Kingdom. That makes good sense. It is a condition of registration in the United Kingdom that certain of the ship's officers are British. The fact would remain that, apart from this, there might be little benefit by way of direct activity within the United Kingdom.
My hon. Friend was persuasive in his moving the clause. He will recognise that my hon. Friend the Financial Secretary earlier made some important statements on shipping in another context. I hope that my hon. Friend will feel that it would be right to reflect upon those statements, and not to pursue the new clause.
I gladly give him the undertaking for which he asked. Of course these matters will be considered again in the light of his comments and, indeed, in the light of the comments of other hon. Members. He will understand that I can make no commitment but that we shall be very willing to examine the suggestions put forward when the matter is considered again.

§ Sir William Clark
I thank my hon. Friend for that reply. Perhaps I, too, can give a categoric assurance that I shall be back with this next year. I hope that he will consider the matter sympathetically within the next 12 months. With that assurance, I beg to ask leave to withdraw the motion.