Schedule 17 - Capital allowances: energy-saving plant and machinery
Finance Bill
12:00 pm
Mr Michael Jack (Fylde, Conservative)
I have a number of points that reflect the representations that have been sent to Committee members. Before I move to those, will the Minister explain paragraph 2? It contains new section 45A, which says:
``Expenditure is first-year qualifying expenditure if...it is expenditure on energy-saving plant or machinery that is unused and not second-hand.''
What happens if someone buys a piece of demonstration equipment? It might have been used to demonstrate how the energy-saving equipment operates in a manner that is compatible with the purchaser's facilities. However, the equipment may not be second-hand in that it has not passed from the manufacturer to a purchaser. Given that there may well be new and novel equipment on the list to which my hon. Friend referred, it would help to know what qualifies as first-year expenditure. In my experience in the horticultural industry many years before becoming a Member, manufacturers would often bring some piece of novel technology for growers to try that might prove to be sufficiently effective that they decided to buy it. I am grateful that the legislation is in plain English, which enables me to understand it, as this is the first time that we have had the chance of debating a piece of legislation that has been subject to the capital law re-write exercise, which I am delighted to see.
With regard to proposed new section 45A(1)(c) of the Capital Allowances Act 2001, the Chartered Institute of Taxation states:
``We note that lessors are to be excluded under new s 45A(1)(c) of the CAA 2001.''
It makes the reasonable point that
``As long as energy-saving plant or machinery is being provided and allowances are given only once, it should not matter whether they go to the user or to a lessor.''
If its assumption is correct, that worries me, because it could be that energy-saving equipment may be the subject of a lease arrangement. I cannot believe that, if the Government wish people to have a high uptake of that type of equipment, they would want to exclude the use of the allowances by those providing the facility by a leased mechanism. Can the Economic Secretary clarify that point?
My hon. Friend the Member for Croydon, South (Mr. Ottaway) rightly teased from the Economic Secretary the point that the list, of which I understand the authors are the energy and environment best practice division of the DETR, is indeed to be published on a website, but nowhere else. I appreciate that there is an assumption that all businesses now have access to the web, but what about embryo businesses that may have some difficulty in that respect? I am equally interested to know how people will know where to find the information. Will the Government, in the great spending splurge on advertising, use some of that money to try to advise people on where they can find the information?
I move on to representations received from the Institute of Chartered Accountants on the matter. Interestingly, referring to proposed new section 45B(4), it says that the certificate will be granted not to the taxpayer, but to the manufacturer of the equipment. That worries me. To save me reading out large amounts of text, will the Economic Secretary describe the processes to be gone through to ensure that, when a manufacturer receives the certificate, there can be no doubt that the subsequent machinery will qualify. Someone may unwittingly decide that their machinery is likely to qualify for the certificate, only subsequently to discover that there is some point of difference between the DETR and the manufacturer. The problem then arises of retrospective withdrawal of the allowance. It may be that that has been carefully thought through, and that the certificate would have to be provided ahead of any transaction. However, to avoid doubt, will the Economic Secretary address the issue?
How will the certification process operate in the context of someone who buys a piece of machinery with a certificate, but finds that it has to be modified in some way to fit into the workplace. Sometimes the dimensions given in the manufacturer's catalogue do not correspond to the actual machinery, so that it does not fit into the workplace. Does a modification to the equipment in some way invalidate the certificate? These are practical problems, and those who would seek assistance under this part of the Bill would like to know whether the original certificate also covers modification.
There is some debate about whether proposed new section 45C is sufficiently clear, and the Chartered Institute of Taxation makes the point that, where one has a mixture of approved and non-approved equipment, there may well have to be some form of apportionment in terms of the relevant capital allowances. The institute's representation states:
``In that event, we would expect the normal apportionment rule in section 562(3) of the Capital Allowances Act 2001 would need to apply. However, new section 45C(5) excludes the operation of section 562(3) in all cases where there both approved and non-approved components.''
Now, this is the kind of nitty gritty problem that needs to be resolved before the schedule comes into operation, and I should be most grateful for the Economic Secretary's enlightenment on these representations.