IBA (Levies) (Hansard, 26 February 1986)

§ Mr. Hurd

In consultation with the Treasury and the IBA, my Department has reviewed the arrangements in the Broadcasting Act 1981 for additional payments by independent television and radio programme contractors (the levies). The review was initiated because of the Government's concern that the high marginal tax rate arising from those arrangements taken together with corporation tax might be a disincentive to efficiency. I have placed in the Library a copy of the report containing the outcome of the review. In considering its recommendations we have also taken account of the 29th Report from the Committee of Public Accounts 1984–85. A Treasury Minute published today sets out the decisions which the Government have now taken. As explained in that minute, we have decided to take an early legislative opportunity to modify the levy provisions along the lanes recommended by the review, so that the profits base on which the ITV levy would continue to be calculated includes profits from provision of programmes outside the United Kingdom. This will enable the marginal tax rate to be reduced, so as to encourage efficiency within the ITV companies. However, in order to preserve an incentive to exports, we shall propose a rate of levy on overseas profits at about half the standard rate.

The opportunity will also be taken to include in our legislative proposals a number of minor modifications to the levy arrangements identified by the review. These will include arrangements to permit any balance of the "free slice" of profits (the proportion of profits which attracts a nil rate of levy) which is not utilised against domestic profits to be carried across to overseas profits; and the minimum level of free slice, as now expressed in cash terms, will be reviewed from time to time. It is also proposed to make changes to the provisions governing 563W refunds to the companies from the Consolidated Fund in the case of overpayment; to extend the provisions containing reserve powers to prescribe a company's minimum levy bill in the event of excessive expenditure; and to permit companies to offset trading losses which are relevant for levy purposes against leviable profits in future years to the end of their contracts. After careful consideration, however, we have concluded that it would not be right for this latter provision to have retrospective effect, as contemplated in the review; and by the same token we are not persuaded of the need to modify the accounting arrangements governing preliminary expenditure in the way recommended.

We also propose to implement the recommendation in relation to the radio levy by reducing the rate of levy to zero. The IBA has since concluded that it would not be practicable to make formal arrangements for the additional sums accruing to those companies who would otherwise have paid levy to be redistributed, and the Government accepts that view.