Schedule 30 - First-year allowances for expenditure on environmentally beneficial plant or machinery
Finance Bill
6:30 pm
Mr Michael Jack (Fylde, Conservative)
I want to pursue the same point as my hon. Friend. The equipment that qualifies for the allowance must be unused and not second-hand. If a
manufacturer of a qualifying piece of equipment had a demonstrator, took it round to various users of the equipment, convinced them of its efficacy and subsequently sought to sell it, it would not qualify for the allowance because of paragraph 1(a). As far as the company is concerned, however, it would be an entirely new purchase because the company would have been convinced by its effectiveness and would therefore want to purchase it.
If someone took a demonstrator back in-house to undertake some rudimentary refurbishment—perhaps a new coat of paint—they could claim that it was new. They could tell a potential user, ''You know it's the demonstrator and I know it's the demonstrator. We have put a new coat of paint on the outside so it looks new and we will give you a discount.'' We could have a wholly artificial situation in which a used, second-hand piece of equipment would technically qualify for the allowance although it was not what it purported to be.
Our discussions of avoidance were interesting. There may be a rational explanation of the provision but it has defeated my understanding, particularly when it comes to encouraging the uptake of environmentally important equipment. For example, margins are tight in the horticulture industry. If people want to move from a less environmentally friendly regime to a more environmentally friendly regime, they might only be able to afford second-hand or refurbished equipment. My hon. Friend the Member for Huntingdon made an excellent point about not encouraging recycling. I am concerned about not encouraging artificiality when the objective is to introduce new types of equipment.
On suggested new section 45H(1)(c), what is the reasoning behind
''it is not long-life asset expenditure''?
A new pipe system that did not leak might be installed to replace a leaky system. Pipes are a long-life asset and have a separate and special tax regime. There may be a rationalisation of why an enterprise that seeks to minimise water loss should be penalised because an item is a long-life rather than a short-life asset and I shall be grateful if the Economic Secretary will explain it.
New section 45I(3) deals with the certification arrangements. I note that there are separate arrangements for certification for each of the devolved or assemblied parts of the United Kingdom. How will the measure ensure consistency? If there are different certification mechanisms north and south of the Scottish border, there are the usual arguments about what happens to an enterprise that straddles the border. Would such an enterprise get a better deal on one side of the border than the other? I do not want to labour the point because I am sure that the Economic Secretary understands it.
Finally, paragraph 4 of schedule 30 deals with first-year allowances. Is there a carry-forward provision because a new enterprise may not have any profits in year one against which to use them? It would be helpful to know whether they can be carried forward.