Clause 70 - Hire cars for disabled people

Part of Finance Bill – in a Public Bill Committee at 2:30 pm on 11 June 2013.

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Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury) 2:30, 11 June 2013

Clause 70 provides for one of a number of cross-cutting measures that are being implemented through the Bill following the introduction of the personal independence payment and armed forces independence payment from 1 April 2013 to replace  disability living allowance. The measures incorporate the inclusion of a reference to PIP in one of the definitions of “disabled child” for the purposes of employer-supported child care, which we have already debated when we considered clause 12; provide a vehicle excise duty exemption for recipients of enhanced mobility PIP and a 50% discount for recipients of standard mobility PIP, which we will come to in clause 188; amend the list of specified benefits for the purposes of exemption from insurance premium tax, which we will deal with in clause 199; amend, for the purposes of vulnerable beneficiary trusts, the definition of “disabled” to include those in receipt of PIP or AFIP, which we will come to in clause 213; and amend the definition of hire cars for disabled persons in the Capital Allowances Act 2001 to include reference to recipients of PIP and AFIP. That sets out the context of the clause.

As Committee members know, the short-life asset regime enables firms to write off the cost of capital assets over their life in the business against the firm’s taxable income, thereby enabling tax allowances to be brought into line with the actual depreciation of plant or machinery when an item is scrapped or sold within eight years of its acquisition. It ensures that the total allowances match the actual net cost to the business, providing an advantage where the allowances would otherwise be less than the net cost.

Cars leased to disabled people fall within the SLA regime. However, the definition of a disabled person for capital allowance purposes is based on receipt of a certain type of benefit, including the disability living allowance. Thus, given the recent changes to disability allowances, which have not been uncontroversial, with the personal independence payment and the new armed forces independence payment being phased in from April 2013, the definition of '”disabled person” for the purposes of capital allowances clearly also needs to change. So clause 70 extends the definition with effect from 1 April 2013. However, reference to DLA in the definition will remain until DLA has been completely replaced.

The tax information impact note states that the change is being made

“so that new and continuing recipients of these benefits and claimants of the tax reliefs and supports are both eligible for the same reliefs and supports”.

Strictly speaking, that is true. However, the tax information impact note also points out that

“it is expected that as part of the overall changes to the welfare system, approximately 500,000 disabled individuals will no longer receive either DLA or PIP”.

We regularly hear concerns that the changes are being made to suit the Government’s rapid deficit reduction agenda and the need for cuts, rather than to ensure that the welfare system meets the needs of disabled people. Of the 500,000 people expected to be taken off disability living allowance, does the Minister know how many currently hire cars that are therefore available for capital allowances under the SLA regime? Does he think that those who currently hire cars but are losing their disability allowance will therefore no longer be able to hire them?

Have the Government assessed the impact on the businesses that hire cars to such people? It will surely be more tax-efficient for such firms simply to stop hiring cars to people in such circumstances. I would be interested to hear the Government’s thinking on how that will  work in practice, or whether they have assumed that businesses will simply be expected to bear the additional cost. I would be grateful if the Minister addressed those points.