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Clause 85

Part of Finance Bill – in a Public Bill Committee at 3:15 pm on 18th June 2009.

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Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury 3:15 pm, 18th June 2009

I am advised that it would not be easier, which is why the Government amendments have been drafted as they have.

In response to the hon. Gentleman’s previous question about swapping developed assets for other developed assets, I can confirm that the legislation already allows the swapping of developed assets for other developed assets and the swapping of undeveloped assets for other undeveloped assets to take place. The change we are proposing now completes the picture.

I hope that it has become clear from what I have said that the Government are willing to listen to what stakeholders have to say on this subject and to take action. However I am unable to recommend amendments 262 to 265 to the Committee. As I understand them, they are designed to add costs incurred in drilling a well to the definitions of relevant assets that can be reinvested in for the purposes of the reinvestment relief in schedule 40.  However, they do not provide any further definition of exactly what costs are to be included within the term “well costs” and what are to be excluded. The general reference to “well costs” does not state what the chargeable gains asset is that would be being reinvested in. Indeed, from a chargeable gains asset perspective, it is not at all clear why the amendments are required, because where a chargeable gains asset is being invested in for the purposes of drilling wells, it would be covered by the Government’s proposed legislation.

If the amendments refer to general well-drilling expenditure, because that is not expenditure on either a licence or plant and machinery and hence would not itself be liable to chargeable gains, it would not come within the chargeable gains regime. Consequently it would be incorrect if it were eligible for the reinvestment relief. I remind the Committee that such general well-drilling expenditure already receives generous tax reliefs, for example through mineral extraction allowances.

The hon. Gentleman is correct in his assessment that tieback infrastructure would be eligible, although the costs of drilling wells are not. We are aware of industry’s view that exploration and appraisal expenditure should qualify for the relief, and we are willing to discuss the matter further with the industry.

As I said, I hope that the hon. Gentleman will feel able to withdraw amendment 266, as it is already covered by Government amendments, as well as the other Opposition amendments in the group. We are more than happy to engage further with the industry on these important matters.