§ Mr. Martenasked the Chancellor of the Exchequer under what circumstances the receipt of a FEOGA grant affects the recipient's tax position, particularly over capital allowances.
§ Mr. Denzil Davies, pursuant to his reply [Official Report, 11th July 1978], gave the following information:
Under section 84(1) of the Capital Allowances Act 1968 expenditure met by grants from public authorities is generally disregarded; and capital allowances are due only on that part of the expenditure which the taxpayer bears himself. This treatment applies to grants from the EEC Agricultural Fund—FEOGA—in the same way as it applies to grants under the farm capital grant scheme.
Similar treatment applies where a grant is made as a contribution towards revenue expenditure which would otherwise be deductible in full in arriving at taxable profits. A grant made to restore or supplement profits is taxable.