§ The Paymaster General (Dawn Primarolo):The tonnage tax was introduced in 2000 as part of a package of measures 82WS designed to help revive the UK shipping industry. In order to place a check on the cost of the tonnage tax, there are rules that restrict the amount of capital allowances that can be claimed by a lessor for expenditure on a ship that is used for activities within the tonnage tax. These rules apply only to finance leases. Some lessors are, however, now offering long-term leases for ships that have the many of the characteristics of finance leases without being finance leases in form. Such leases can be used to allow lessors to claim significantly more in capital allowances than had been intended when the tonnage tax was introduced. The extra cost is not justified and does nothing to further the objectives of the regime. The next Finance Bill will, therefore, contain a provision extending the restrictions. The provision will take effect for leases entered into on or after today.
The Inland Revenue are today publishing further details of the proposal. Draft legislation containing the provision will be issued shortly and the Inland Revenue will consult with those concerned on the details of that legislation.