HC Deb 21 April 1994 vol 241 cc599-600W
Mr. David Shaw

To ask the Chancellor of the Exchequer if he will make a statement on balancing charges for ships and measures to assist the shipping industry.

Ms Walley

To ask the Chancellor of the Exchequer what new measures he now proposes to assist the British merchant fleet.

Mr. Kenneth Clarke

The health of the merchant fleet is clearly a matter of great concern both inside and outside the House. The Government have made it clear that we recognise the very important contribution which shipping makes to the economy and the essential role which the industry can be called on to play in a national emergency and we have shown in the past our willingness to help with the problems which it faces.

We recognise that it is common for shipping companies overseas to benefit from special tax provisions. We believe that such special provisions introduce distortions which can inhibit competition and lead to the inefficiency allocation of resources. We will be raising these points forcefully with the European Commission.

However, we also recognise that, competitively, tax measures available overseas put our shippers at a particular disadvantage. We have therefore decided to introduce a provision which will allow capital allowance balancing charges for ships to be rolled over for a period of up to three years from the date on which the ship is disposed of, to be set off against subsequent expenditure on ships within that period. The amount of any balancing charge which can be rolled over will be limited to the amount needed to ensure that no tax liability arises as a result of a ship's disposal. We estimate that this measure will benefit the shipping industry by up to £20 million per annum in a full year. In drawing up this provision we will be considering whether it should be restricted to ships on the United Kingdom register; and in doing so will take account of what our European Union partners do.

As with any measure of this sort we have an obligation to notify the Commission of the proposal. Subject to the outcome of discussions with Commission, we will be bringing forward the necessary legislation in next year's Finance Bill, with retrospective effect from today. The draft legislation will be made available by the Inland Revenue as soon as possible.