CAPITAL ALLOWANCES FOR FIXTURES (Hansard, 10 July 1985)

§ Mr. Moore
I beg to move amendment No. 75, in page 147, line 46, at end insert 'and (c) the occasion of the fixture ceasing to belong to the former owner is not its permanent severance from the relevant land (whether on disposal, demolition, destruction or otherwise)'.

Mr. Deputy Speaker
With this it will be convenient to take Government amendments Nos. 76 to 78.

§ Mr. Moore
These four amendments substantially alter the rules which require disposal value to be brought into account when a fixture is treated as no longer belonging to someone for capital allowance purposes.
The difficulties at which the amendments are aimed arise because the value of fixtures turns very much on the value of land to which they are attached. At the extreme, the fixtures in a building may be very valuable, but they are not worth much to someone whose lease has only one 1182 day to run. The rules which we had originally intended are contained in paragraph 9 of schedule 15. Paragraph 9 provides a general set of rules which require the adoption of a notional sale price based on an apportionment of some arbitrary assumptions about the open market value of the interest in the land to which the fixtures are attached.
Originally, this approach was regarded as necessary so that on the basis of that open market valuation at least some capital allowances could be recovered from the old owner and the fixtures at the same time as the new owner began to receive allowances.
It has been widely suggested by the British Property Federation, the CBI, all the accountancy bodies and the Institute of Taxation that the rules should give greater recognition to the actual consideration — the hon. Member for Sedgefield referred to this — if any, of the fixtures which passes between the parties concerned, assuming that they are acting on an arm's length basis. It is that which the amendments do.
The amendments in practice will considerably reduce the extent to which open market value calculations have to be made and correspondingly will increase the extent to which the actual sale proceeds which pass between the old and new owners of a fixture can be brought into the old owner's capital allowances computation.
We believe that, even though it is longer than the present set of rules, this alternative approach to dispose of value can be widely welcomed by those concerned with this difficult subject, whether directly or as professional advisers, since a great deal of work on valuations and apportionments will be avoided altogether.

§ Mr. Randall
I have a brief question. I was interested to hear the Minister's explanation in which he suggests that we de-couple certain fixtures from assets like land and other assets which should not be taken into account in deciding values when computing the capital allowances. I am wondering whether, in carrying out the computations, this de-coupling exercise might be susceptible to abuse. Land is a fairly cut and dried issue, but there must be other examples where it would be necessary for the Inland Revenue to de-couple the assets in such a way that the boundary becomes blurred and a judgment therefore more difficult to make. Can the Financial Secretary say whether he thinks that in some of the other examples where this exercise will need to take place there might be the opportunity for abuse?

§ Mr. Moore
I shall examine very carefully the hon. Gentleman's point. We are very conscious of the problem of avoidance. The hon. Member for Workington (Mr. Campbell-Savours) raised in Committee a similar point and we gave assurances upon it. I am happy to give assurances on this point. However, I shall look at the matter again and will write to the hon. Gentleman if I find that there is any need to consider the matter further.