§ Mr. Lathamasked the Chancellor of the Exchequer if he is satisfied with the 100 per cent. capital allowances for the construction of small industrial workshops introduced in the last Budget, and with the other capital allowances for business buildings.
§ Mr. Peter ReesThere has been much interest in the construction of small industrial workshops since 100 per cent. capital allowances for a 3-year period were announced in the Budget. There is good reason to hope that this incentive, together with the other measures the Government have taken, will result in a considerable increase in the availability of this type of industrial premises.
However, some technical weaknesses in the present tax legislation have recently come to light. The main defect concerns sales of small workshops. Under the present rules, a person who builds a small workshop and then sells it, gets tax relief on more than its net cost to him; while the purchaser gets no tax relief on what he spends. My right hon. and learned Friend the Chancellor of the Exchequer has decided that action should be taken in the next Finance Bill to end this anomaly. It will apply to any sale made after today—except where under a contract of sale made on or before today.
Although the anomaly described above arises, at present, only with small workshops, the defective provisions apply also to the capital allowances for buildings in enterprise zones, for qualifying hotels, and for industrial buildings which are not small workshops. The changes proposed will therefore take the form of amendments to the industrial buildings allowance rules on which all these capital allowances are based.
The Inland Revenue is issuing a press release explaining the present position in more detail, and the changes proposed, including draft clauses for the Finance Bill. Copies are available in the Library.