Finance Bill

Let me read the quotation again:"““There was general support for a commercial buildings allowance, incorporating the current Industrial, Hotel and Agricultural Buildings Allowances.””" There was therefore support for a wider allowance, but not for the abolition of the existing allowances. I am not sure what point the Chief Secretary is trying to make. There was support for a broader set of allowances. My point is that, despite what the Chief Secretary said in Committee about it not being customary for the Government to consult on tax reductions and reliefs, they had already conducted a consultation on the future of corporation tax which indicated industry’s views on particular allowances, so it seems strange that they did not consult before making changes that are significant to a number of sectors. In Committee, the right hon. Gentleman referred to the regulatory impact assessments produced for the annual investment allowance, saying that that might cover some of the same areas, but in a sense, the die had already been cast: the changes in the Finance Bill set in train a series of events that would lead to the abolition of these other allowances. Regardless of the rights and wrongs of particular allowances, there should have been consultation on the changes and it was wrong of the Government to proceed so quickly, without having thought through the points that had been made after the Budget was announced. In Committee, the Chief Secretary argued that, despite the end of IBAs and ABAs, the tax system still contained recognition for those buildings, because repairs and maintenance could be offset against a company’s profits in determining their tax charge. Of course that is true—but that also applies to other assets that qualify for capital allowances. That is therefore not an especially strong argument to deploy in connection with IBAs and ABAs. He also said that depreciation would be reflected through the capital gains tax calculation on disposal of the assets, but CGT also applies to the disposal of other assets that qualify for capital allowances. Furthermore, as my hon. Friend the Member for South-East Cambridgeshire pointed out, holders of agricultural tenancies do not own the buildings, so if the buildings are sold, their investment will not be reflected in that process. The implicit relief that the Chief Secretary referred to will not benefit them, because they do not own the buildings. They will gain no tax benefit other than in relation to the costs of repair and maintenance. In Committee, I mentioned representations that I had received from various people in the agricultural sector on the sums that had been locked up in unrelieved capital expenditure. Tenant farmers will find that particularly difficult now: they made the investment on the basis that the relief would continue, but it is being taken away from them. The agriculture sector is not alone in being affected by the change. The hon. Member for Dundee, East (Stewart Hosie) talked about the hotel sector, and I know that Bob Cotton of the British Hospitality Association has gone to the Treasury to discuss the impact of the changes in capital allowances on the sector that he represents. Many hoteliers have invested heavily in new property in the expectation that the relief would continue. Small businesses, too, are affected by the change. In Committee, it was argued that they will qualify for the annual investment allowance, but that applies to future investment; they will not benefit in respect of past investments. Small companies will be hit by the increase in the small business rate of corporation tax, and we know that the changes in IBAs, ABAs and other capital allowances have been used to fund the decrease in the mainstream rate of corporation tax, so many small companies face a double whammy: their corporation tax rate will increase, but they will lose the benefit of the industrial and agricultural buildings allowances. The Government have got themselves into a real mess. They did not properly think through the impact on those sectors of the removal of the allowances and how it would affect those who had made investments. Tonight, the Chief Secretary must not just make the case again, but demonstrate that the Treasury thought the changes through and was aware of their effects on those important sectors. If he cannot make that case, many people will wonder how much thought goes into putting together a corporation tax reform package such as the one that the Chancellor announced in March. At the moment, the evidence suggests that the package was cobbled together rather hastily and was not well thought through.