§ Mr. BeithTo ask the Chancellor of the Exchequer whether input tax will be recoverable by privatised electricity distribution companies on the costs arising from the sale of their own shares on a basis which differs from normal VAT practice; and whether he will make a statement.
§ Mrs. Gillian ShephardInput tax incurred by a business in relation to the issues or sale of its own shares, an exempt supply, is not recoverable. However, shares in the electricity distribution companies were issued and sold on behalf of the Secretary of State for Energy, not the electricity distribution companies and the benefits of the sale accrued to the Government. Costs incurred by the electricity distribution companies in their privatisation were regarded as general overheads of their business—mainly the taxable supply of electricity—and any associated VAT was recoverable in accordance with the provisions of the VAT Act 1983.