Mr Stephen Timms (Financial Secretary, HM Treasury; East Ham, Labour)

As one element in ending the current arrangements that allow employees to claim for their actual motoring costs—no longer necessary because of the new statutory provision—the clause terminates the option of claiming capital allowances, by treating the employee as ceasing to own the car immediately before 6 April 2001. The consequence of the rule is that capital allowances for 2001-02 are computed as if the car had been sold at open market value. That could provide a balancing allowance or a balancing charge.

In practice, it is unlikely that a balancing charge will arise. There has been substantial depreciation in the second-hand car market of late, and the rates of commercial depreciation on cars are similar to, or exceed, the rate at which capital allowances are provided. It is not inconceivable that the problem mentioned by the hon. Gentleman might arise, so to minimise any burden on taxpayers, and to ensure that they do not suffer a tax charge as a consequence of the change to the new system, Inland Revenue officials will accept claims for capital allowances that treat the written down value at the end of 2001-02 as open market value. I hope that I have reassured him and the Committee that no charge will arise in those circumstances.

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