Business Rate Supplements Bill

I beg to move Amendment 25 standing in my name and that of my noble friend Lord Brooke of Sutton Mandeville. I have been asked to proffer his apologies to the Committee. He had expected this amendment to be dealt with last Wednesday. He is not able to be in his place today and I readily agreed to add my name to the amendment and to move it. The amendment inserts a further requirement for the prospectus when a supplementary business rate is sought. The authority would have to assess the impact of the proposed supplementary rate on voluntary contributions that businesses may already be making to support public transport projects. The amendment had to be drafted in that form to put it within the rules of the House. The issue that I wish to raise briefly this afternoon is more fundamental. Through the amendment I seek to explore how far the voluntary financial contributions made by businesses to fund public infrastructure projects from which they benefit are tax-deductible. That is why the voluntary contributions concerned are defined in the second part of the amendment as those that are allowable against tax as business expenses under the Income and Corporation Taxes Act 1988. I am well aware that the whole question of whether local authorities should have powers to raise additional business rates is contentious. I read the Second Reading speech of my noble friend Lord Bates and I very much understood what he was saying, but I do not intend or need to take a position of that question this afternoon when dealing with this rather specific amendment. The motivation behind the amendment is prompted by the funding of the Crossrail project. I think it is fair to say that there is general agreement that an additional business contribution is necessary to support Crossrail. On Second Reading of the Crossrail Bill I asked the Minister what would happen if the voluntary contributions from business were for some reason not forthcoming. I have not checked it out, but my recollection is that we would have to deal with that if it happened. Of course, the remedy, following the reports to which much reference has been made, was that there should be new legislation, which we now have before us, to provide the contribution from the private sector to help to finance that hugely important project. The City of London Corporation agreed in October 2007 to contribute £200 million out of its own coffers. It also agreed to seek voluntary contributions—that is why this issue arises—up to a total of £150 million from businesses that will benefit from Crossrail. Of course, as we all recognise, raising voluntary contributions at the present time must be particularly challenging, but any business considering making them is likely to be more favourably inclined to do so if it can be sure that such contributions will be tax-deductible as a business expense. The position of business rate payments is quite clear. The Business Income Manual, produced by Her Majesty’s Revenue and Customs for its staff and published for the information of taxpayers in accordance with the code of practice, provides: ""Business rates are payable in respect of non-domestic premises. If part of the premises is used for domestic and part for non-domestic purposes, the charge is limited to the non-domestic part. Business rates are therefore usually an allowable deduction in computing profits assessable under Schedule D Cases I, II or under Schedule A."." If business rates are deductible, it follows that the supplementary business rates envisaged by this Bill will also be deductible. Perhaps the Minister will confirm that. As a matter of policy, if supplementary rates levied to support public projects are deductible, it would seem right in principle that voluntary contributions made by businesses for precisely the same purposes should receive precisely the same treatment. This seems to be supported by the law if businesses make contributions because they would benefit from the improvements, which presumably will usually be the reason prompting them to contribute. It is a long time since I was practising at the tax bar, but my recollection is very clear. A business expense is allowable if it is incurred wholly and exclusively for the purposes of the business. Those who make voluntary contributions to the Crossrail scheme will, without doubt, do so in the context of much-improved cross-London communications that the scheme will bring to their business operations, and therefore because they are benefiting from it. Therefore, the case for deductibility appears entirely legitimate. However, in view of the importance of the Crossrail scheme and the incentive which deductibility may provide to businesses which might be inclined to contribute voluntarily, it really would be helpful if the Minister could indicate the position in general terms either today, or perhaps—she may prefer to consult—in correspondence. Of course, I will understand if she wishes to write with a substantive reply, but I am sure that she understands that tax deductibility may be quite important to a business that is contemplating making a voluntary contribution. I should have thought that the Government would wish to support anything which could help this absolutely crucial infrastructure forward. I beg to move.