Mr. Jim Callaghan
asked the Chancellor of the Exchequer if he intends to take any action about schemes under which individuals liable to the additional and higher rates of tax are entering into leasing partnerships and obtaining the benefit of 100 per cent. first-year allowances in a wholly artificial way in order to reduce their effective rate of tax.
§ Mr. Robert Sheldon
Yes. I am aware that schemes have been divised which exploit the 100 per cent. first-year allowance in conjunction with other tax provisions to minimise the tax liability of464W higher rate taxpayers through the medium of leasing partnerships. Substantial amounts of revenue are at risk. I therefore propose to introduce provisions in the next Finance Bill which will ensure that where machinery or plant is leased or chartered by a partnership which includes a company and an individual, or by an individual or a partnership of individuals with an arrangement to bring in a corporate partner at some time in the future, whether trading or non-trading, the tax relief for capital allowances will be available only against the rental income of the partnership or individual. This legislation will apply to any expediture on such machinery or plant incurred after today.