§ Mr. BurnsTo ask the Chancellor of the Exchequer if he will provide further details of the capital allowances measure announced on 13 January.
§ Mr. DorrellAs announced on 13 January, at column249, the Government propose to bring forward legislation at Committee stage of the Finance Bill to rectify a defect in the capital allowances legislation as it affects the disposal of long leases in enterprise zone buildings.
A number of taxpayers have asked for more detail of what the legislation will contain. In the interests of reducing uncertainty which may be affecting perfectly legitimate commercial decisions, I am announcing further details now in advance of the draft legislation being published.
The aim of the measure is to prevent abuse of the enterprise zone allowances for tax avoidance, without damaging the incentive for bona fide investments in enterprise zone property. The legislation will therefore provide that a balancing charge will be imposed when a long lease is disposed of within seven years. This seven-year limit on balancing charges will not apply to artificial tax avoidance schemes which include guaranteed exit arrangements. For those schemes a balancing charge will apply if the building is sold within the first 25 years of its life.
Representations have been made that the weakness in the capital allowances legislation is not significant in the case of buildings eligible only for normal industrial buildings allowances. The Government accept this and the draft legislation will cover buildings in enterprise zones qualifying for 100 per cent. capital allowances, but not other buildings.
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