Schedule 21 - Capital allowances: minor amendments
Finance Bill
6:30 pm
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.