Schedule 21 - First-year allowances for expenditure wholly for a ring fence trade
Finance Bill
5:15 pm
Ms Ruth Kelly (Financial Secretary, HM Treasury; Bolton West, Labour)
I thank the hon. Gentleman for the constructive manner in which he spoke. The amendment would indeed give long-life assets with a span of at least 25 years the full 100 per cent. new first-year allowance. Although I understand the hon. Gentleman's argument, he has not made a real case for such a change. We have increased fourfold the allowance for the vast bulk of capital expenditure in the North sea in the first year—from 25 per cent. to 100 per cent. The increase for long-term assets, too, is increased fourfold—from 6 per cent. to 24 per cent. Long-life asset provisions exist to align the rate of depreciation for tax more closely with commercial depreciation. A rate of 24 per cent. is far in excess of normal commercial depreciation, and is therefore extremely generous for assets that have a long life.
The hon. Gentleman pointed out that not many assets in the North sea have a long life, and said that it might not be that expensive to extend the 100 per cent. rate to long-life assets. I agree that not many long-life assets are to be found in the North sea, but such assets
are indeed expensive and extending the rate would have a significant revenue cost to the Exchequer. In other areas, such as for small and medium-sized enterprises, although generous first-year allowances are made, they are not applied to long-life assets, which continue to attract 6 per cent. We see no case for increasing the allowance further. I therefore urge the hon. Gentleman to withdraw the amendment.