§ Mr. Matthew BanksTo ask the Chancellor of the Exchequer what changes he proposes to make to the rules on capital allowances for fixtures following the House of Lords case last year of Melluishv. BMI (No. 3) Ltd. and others. [39945]
§ Mr. JackThe Government intend to introduce legislation in the next Finance Bill to correct defects in the rules for giving capital allowances on fixtures in buildings. These defects allow tax to be avoided by obtaining allowances on more than the cost of the fixture and through the acceleration of allowances. The legislation will also reverse that part of the decision of the House of Lords in Melluishv. BMI (No. 3) Ltd. which gave allowances to equipment lessors on fixtures leased to persons not liable to tax. The new rules will apply to expenditure incurred on or after today.
These changes open the way to simplify and deregulate these rules. At present, valuations have to be made whenever allowances are claimed on fixtures included in a property sale. This has been criticised as complex, costly and incorrect. The Inland Revenue will publish proposals today for consultation. The proposals would, in many cases, allow figures agreed between the purchaser and the vendor to be accepted for tax purposes. The Inland Revenue will also consult with representatives of the property industry and their professional advisers on ways in which the rules could be improved further. Subject to the outcome of the consultation, we intend to introduce these measures in the next Finance Bill.