I shall be very brief. The Minister will recall that we discussed in Committee, under clause 37, the matter of the Custom House and Canning Town community renewal project and the effect that the changes would have on it. My hon. Friend the Member for Bristol, South (Ms Primarolo) and I both mentioned that matter. Amendments Nos. 11, 12 and 13 put into effect the announcements made by the Minister in Committee. However, the accountants who are advising the project have mentioned some difficulties, on which I should like to question the Minister.
In a case in which a charity is the developer of a refurbished building and intends to occupy a small office in it comprising about 2 per cent. of its floor space, will subsection (13) in amendment No. 12 mean that that charity will not be able to reclaim any VAT on the project because it will occupy, as the developer, a small part of the building? The charity has always accepted that it will not be able to reclaim VAT on the 2 per cent. of floor space that it uses. That matter was not mentioned in Committee, but since the amendment was published it has caused some alarm to those involved with the project.
I raised two other issues in Committee, and the amendments do not make it clear how they have been dealt with, as the Minister said that they would. Will the Minister confirm that, in cases in which small businesses occupying commercial units are below the VAT threshold, the VAT paid will still be reclaimable? He said in Committee that he intended to exempt small workshops from the provisions of clause 37, but I am not sure where in the amendment that exemption has been made. Perhaps he will clarify that matter.
Secondly, as I mentioned in Committee, the district health authority has contributed £50,000 to the project because it would include a health centre. Will the Minister give an assurance, consistent with what he said in Committee in 11 February, that a general practitioner will not be regarded as being connected with a person responsible for financing the development, so that VAT will continue to be reclaimable on that part of the project?
I hope that I can give some clarification to the hon. Gentleman. Charities benefit from zero rating on new buildings for non-business use. Up to 10 per cent. business activity is allowed. That relief remains unaffected.
The amendments do not help a doctor, a financial sector operation, a business or any similar operation that is exempt. An exempt business gains benefit from being exempt and therefore does not have to charge VAT to its customers. The fact that doctors and hospitals cannot reclaim is reflected in their funding, which is gross of that unclaimable VAT.
The amendments are not designed to help those, such as exempt businesses or doctors, who should not be able to reclaim. Those who are exempt should not have the right to tax, and therefore the right to reclaim, otherwise they would be getting it both ways—reclaiming without having charged, or while being funded gross.
I hope that that answers the hon. Gentleman, but if he wants to deal with those points in detail with me, I shall be happy to oblige with the greatest of pleasure.
Amendments made: No. 12, in page 31, line 16, leave out from beginning to end of line 6 on page 32 and insert—
(2) For the purposes of paragraph 2(3AA) above a grant made by any person in relation to any land is a grant made by a developer of that land if—
(3) In paragraph 2(3AA) above and this paragraph the references to a person's being responsible for financing the grantor's development of the land for exempt use are references to his being a person who, with the intention or in the expectation that the land will become, or continue (for a period at least) to be, exempt land—
(4) In sub-paragraph (3)(a) and (b) above the references to providing finance for the grantor's development of the land are references to doing any one or more of the following, that is to say—
(5) The references in sub-paragraph (4) above to the provision of funds for a purpose referred to in that sub-paragraph include references to—
(6) In sub-paragraph (4) above the references to the grantor's development of the land are references to the acquisition by the grantor of the asset which—
(7) For the purposes of paragraph 2(3AA) above and this paragraph land is exempt land if, at a time falling within the period mentioned in sub-paragraph (2)(b) above—
(9) Subject to sub-paragraphs (10) to (12) below, a taxable person in occupation of any land shall be taken for the purposes of this paragraph to be in occupation of that land for eligible purposes to the extent only that his occupation of that land is for the purpose of making supplies which—
(10) For the purposes of this paragraph—
(11) For the purposes of this paragraph, where land of which any person is in occupation—
(12) Sub-paragraphs (8) to (11) above shall have effect where land is in the occupation of a person who—