(Except clauses 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84, schedules 1, 18, 22 and 23, and new clauses relating to microgeneration) - Clause 17
Finance Bill
10:45 am
Stephen Timms (Chief Secretary, HM Treasury; East Ham, Labour)
I do not have the date in front of me but I will check it. I hope to be able to respond to the hon. Gentleman in a moment.
Corporate landlords will be able to deduct the cost of acquiring and installing solid wall, cavity wall and loft, floor and hot water system insulation, and draught-proofing.
Extensions to LESA for non-corporate landlords, who already benefit from the original LESA, aremade for income tax in clause 18 to match those in clause 17 for corporation tax, and represent a further incentive for landlords to increase the energy efficiency of their properties. Clause 18 extends LESA by making the allowance that is currently set to end in 2009 available until 2015.
From 2008, energy performance certificates will be introduced in the private rented sector for every home bought, sold and let in the UK. Those certificates will highlight to landlords and tenants the existing energy efficiency of properties, as well as suggesting affordable ways to improve them. Setting 2015 as the date strikes a good balance between giving landlords enough time to take advantage of the allowance and encouraging them to take steps to improve the energy efficiency of their properties as soon as possible. The extension of the allowance by six years gives them time to take full advantage of the extended allowance and to benefit from the information provided by energy performance certificates.
Secondly, the clause ensures that the LESA is available for expenditure on increasing the energy efficiency of communal areas within properties, providing an incentive to improve the energy efficiency of the whole building. We have already, through secondary legislation, made the allowance available for expenditure on floor insulation, changing the maximum annual deduction available from £1,500 per building to £1,500 per property. That means that for a landlord who owns and lets a block of 10 flats, the maximum deduction available per flat is increased from £150 to £1,500. I hope that the Committee has seen the draft of the regulations that we intend to lay afterthe Bill receives Royal Assent. They ensure that the maximum annual deduction of £1,500 will continue to operate correctly for expenditure on communal areas.
Let me respond to some of the points that have been raised in our brief debate. The hon. Member for Falmouth and Camborne asked a fair question about furnished holiday accommodation. We have thought carefully about that, and the evidence is that there is not the same market failure in the case of furnished holiday lettings that there is in the private rented sector more generally. For example, it is common for owners of furnished holiday accommodation to live in their properties for part of the year, so they will benefit directly from energy efficiency improvements.
In any case, the commercial letting of furnished holiday accommodation is treated more favourably for tax purposes from other rental businesses. That suggests that it would not be right to provide the LESA for furnished holiday accommodation. However, it is a fair point that we ought to keep under review arrangements to encourage the right level of energy efficiency in furnished holiday accommodation. If it is appropriate at some point to introduce fiscal incentives for that purpose, we will be open to doing so.
We expect the cost of the extensions to be up to£10 million per year. That is set out in table 1.2 of last week’s pre-Budget report documentation. The things that will count as energy-saving items in the regulations will be those that I have listed: floor insulation, loft insulation, cavity wall insulation, solid wall insulation, draught-proofing and hot water system insulation.
The hon. Member for Braintree asked why we did not make the incentive available for a dwelling under construction. The answer is that, as a result of recent changes, building regulations require new properties to be built to a high standard of energy efficiency. As a regulatory requirement already exists, making the LESA available would cost the taxpayer money but would not have a beneficial effect. The aim of the LESA is to target a market failure where there is no requirement, as in the case of existing privately rented properties, for energy efficiency measures to be taken.
Finally, the hon. Member for Braintree also asked why we needed separate regulations for income tax and corporation tax. It is because they are covered by two different Acts, so it is necessary for there to be two separate sets of regulations. Indeed, they will take effect on different dates. However, I can reassure him that the definition of energy saving items will be the same for both income tax and corporation tax. I hope that that will be of some comfort to him.