Mr Richard Ottaway (Croydon South, Conservative)

As you are aware, Mr. O'Hara, I tabled an amendment to schedule 21 yesterday. It is, of course, a starred amendment. However, as we are ahead of the clock, I hope you will allow me to mention it in the stand part debate.

Mr Edward O'Hara (Knowsley South, Labour)

It is common sense to allow debate on subjects covered by the clause stand part debate.

Mr Richard Ottaway (Croydon South, Conservative)

Thank you, Mr. O'Hara. I will not detain the Committee for long. This relates to the £12,000 restriction on the use of a business car. If a business buys a car costing more than £12,000, capital allowances are restricted to £3,000 per annum if the car is used wholly for business. However, the whole cost of the car will eventually be allowed to the business. The limit was raised in 1992 from £8,000, and has not been increased since then. It would result in considerable simplification of tax computations if full tax relief were available on the purchase or hiring of cars. Alternatively, as suggested in our probing amendment, the £12,000 limit could be adjusted in line with inflation. The Economic Secretary will no doubt say that it might cause difficulties for accounting. It has not been adjusted since 1992, so the previous Government must accept equal responsibility, but I look forward to hearing what the Economic Secretary has to say.

Miss Melanie Johnson (Economic Secretary, HM Treasury; Welwyn Hatfield, Labour)

Indeed, the £12,000 limit was set in the second Finance Act of 1992. It had been set at £8,000 since 1979. I shall not invite the Committee to support the amendment, because it would lead to unnecessary complexity and anomalies.

Tax relief is available for the full commercial depreciation on cars. Section 74 of the Capital Allowances Act 2001 limits cars costing more the £12,000 to an annual allowance of £3,000. When the car is sold, an adjustment is made to bring the total allowances into line with the actual commercial depreciation. The effect of the limit is to delay the allowance, so the benefit is only one of timing.

The amendment would greatly increase the complexity of the current rules. The £12,000 limit is well known and it would be more difficult for practitioners and others to have a variety of limits changing every year. That would be the consequence of accepting the amendment. A single round sum limit is preferable.

Furthermore the amendment does not achieve what it was designed to do. It would lead to an anomaly because it would raise the £12,000 limit, but not the £3,000 annual allowance, in line with inflation. Beneficiaries would be limited to those who purchased a car costing between £12,000 and any increased limit. No similar amendment is proposed to the rules restricting allowances for leased cars in section 578A and 578B of the Income and Corporation Taxes Act 1988.

The amendment would bring no benefit to businesses with leased cars and would break the link between the capital allowances limit and restrictions for leased cars—a link that has been in place for more than 30 years. Finally, the amendment does not specify when the increase should be made or over what period of RCI the adjustment should be calculated. For all those reasons—I realise that it is a probing amendment—I urge the hon. Gentleman not to press it to the vote.

Mr Richard Ottaway (Croydon South, Conservative)

The Minister says that it would add to the complexity of the preparation of accounts. In fact, the recommendation came from the accounting profession and was intended to simplify the accounting, so we shall have to differ on that. Otherwise, I am grateful to the Minister for responding to a starred amendment and I accept what she said. Because it is starred, I do not need to withdraw it.

Mr Edward O'Hara (Knowsley South, Labour)

The question of withdrawal does not arise, but we must consider whether to approve schedule 21.

Schedule 21 agreed to.

Mr Graham Allen (Government Whip (technically Vice Chamberlain, HM Household); Nottingham North, Labour)

I beg to move, That further consideration be now adjourned.

With your agreement, Mr. O'Hara, and with that of the Committee and, of course, the right hon. Member for Fylde, I propose that we adjourn until Thursday at 9.30 am.

Mr Michael Jack (Fylde, Conservative)

I am delighted that the Government Whip has now seen fit to seek the approval of Opposition Back Benchers and I am delighted to give my views.

Mr Edward O'Hara (Knowsley South, Labour)

In which case, the right hon. Gentleman knows which way to vote.

Question put and agreed to.

Adjourned accordingly at twenty-six minutes to Seven o'clock till Thursday 3 May at half-past Nine o'clock.