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New Clause—(Initial And Annual Allowances, &C, For Office Buildings)

Volume 466: debated on Tuesday 28 June 1949

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(1) In section twenty-five of the Income Tax Act, 1945 (which defines the expenditure on which allowances may be given under Part III of that Act) sub-paragraphs (vi) and (vii) to the proviso to subsection (1) shall be deleted.

(2) In no case shall the amount on which a balancing charge is made upon a person be increased by virtue of the provisions of this section by more than the total amount by which annual allowances made to that person are increased by virtue thereof.

(3) The preceding provisions of this section shall be deemed always to have had effect.—[ Mr. Eccles.]

Brought up, and read the First time.

I beg to move, "That the Clause be read a Second time."

The object of this new Clause is to extend to certain office buildings the initial allowance and the annual allowances given under the Income Tax Act, 1945. That Act excluded all office buildings from the scope of the allowances, and the Committee will remember that the argument used by the Treasury Bench in defence, of that exclusion was that office buildings have a value independent of the production unit with which for the time being they are connected. The head office, or it may be the sales office, of a manufacturing company might be in London, and might not lose any of its value if the factory with which it is concerned closed its doors. There was also the argument that office buildings are very often two or three rooms in a big block of buildings, and it would be very difficult to give the allowances in respect of two or three rooms in a large block of buildings.

That argument had some force in relation to the United Kingdom, which is a small and crowded country, though I was not entirely convinced by it at the time, but the Committee will see the force of the proposition put forward by my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson). We have taken it into consideration in this new Clause, and therefore we have confined the extension of the allowance to office buildings to those belonging to British mining companies operating overseas.

Part III of the Income Tax Act, 1945, gives an allowance to other types of buildings which are erected as part of the equipment of the mine; for example, the building in which the mining stores are kept, the building in which the production plant is housed, the building in which the winding engine is erected; all these buildings get the allowance. What reason can there be not to extend the cover to other office buildings which may be used for the purpose of drawing offices or assay offices, all of which buildings become substantially valueless when the mine is exhausted?

I think the principle of this new Clause was conceded by the Government when we were discussing Amendments to Clause 18, because, with one small exception, the Government said that the site acquired for buildings such as these would rank for the allowances. If we give the allowance for the site, it is really only reasonable to give it for the buildings erected upon the site, and therefore I think that the principle has already been given away on Clause 18. It does sometimes happen that buildings of this type right on the site of operations may have some value when the mine shuts down. After all, there is a housing shortage in other countries as well as Great Britain, and it is quite conceivable that when a mine closes down somebody may wish to take over the office buildings and live in them. If that does happen, the Act takes care of it, and a balancing charge is imposed upon the value for which the building is sold if it is higher than its written-down value.

I therefore urge the new Clause on three grounds. First, on sheer common sense, because there is really no substantial difference between a building which is used for mining stores and a building used for assaying the mineral daily brought up for testing from the mine itself. I think we ought to go further. The whole of the changes which we are urging in the taxation of British overseas mining companies, many of which were embodied in Clause 18, are designed to remove handicaps upon British companies as compared with mining companies of other countries, and this new Clause represents a small but none the less definite handicap to be removed from British companies. We are in no position for American, Canadian and other companies to have advantages over our companies in developing our material resources abroad.

I hope the Government will look beyond the purely legal principle or the Income Tax principles which governed the situation in July, 1945, when we were discussing for the first time the original Bill. We did not then think how keen would be our anxiety to earn every possible sum in foreign exchange. The Chancellor met us to the extent of setting up a Departmental Committee, upon whose recommendations the changes in this Bill have been founded, and I should like to thank the right hon. and learned Gentleman for having let me know that he is prepared to publish the report of that Committee. I am sure it will be of great assistance to mining interests.

I am sorry that we feel that we cannot accept the proposal in this new Clause, and for these general reasons. The considerations which led to the exclusion of office buildings when the 1945 Income Tax Act was being drafted were not legalistic. They were based on the general economic considerations that priority should be given to buildings which could be said to be industrial. The hon. Gentleman moved a very similar Amendment in 1945 to the Income Tax Act of that year, and the Chancellor of that time, the right hon. Member for the Scottish Universities (Sir J. Anderson), opposed it upon the general economic considerations that office buildings were not the sort of buildings designed to be comprehended by the relief provisions of that Act.

That was subject to one qualification. They are excluded from the initial allowance provided by the first part of the Act, which still stands, but when the question of allowances in connection with mining and oil companies was concerned, there was a slight exception embodied in framing that Act, and it was that, although relief could not be given if there was a separate office building, it could be given in the cases where the office buildings formed part of the main industrial production plant, and provided that the expenditure on the office buildings did not exceed one-tenth of the total expenditure on buildings. The Chancellor of the day felt that he could not go beyond that in replying to the proposal which the hon. Gentleman then made during the Committee stage of the 1945 Income Tax Act.

Substantially, the position now is as it was then, and I say substantially because there is, after all, the Committee on Income Tax which has been set up which will take just this sort of consideration particularly into account. It is par excellence the sort of problem with which that Committee should concern itself, and, in asking the Committee to reject the present proposal, I would say that it was rejected in 1945 for considerations which, broadly speaking, are still applic- able. It is just the sort of problem which the Committee now sitting should investigate, and it really would be unwise for us to make a change which amends the general principle upon which the 1945 Act was framed. It is precisely the desirability of such changes which will be considered by the Committee now set up to deal with the question of Income Tax and other questions of the basis upon which profits should be computed for purposes of Income Tax. For these reasons, I recommend the Committee to reject the present proposal and to leave it for the consideration of the Committee which has been set up to consider and report upon it.

I would make one comment on the new Clause as it stands. The hon. Gentleman said that he had limited the new Clause to the case of foreign mining concessions. I speak subject to correction, but, certainly as I read it, it does not have that effect, but has the effect of embodying a general exception to the provisions of Section 25 of the Income Tax Act, 1945. For the general reasons that this matter was dealt with in 1945, that there has not been any radical change in the situation which would justify a departure from the principle upon which that Act was framed, that a Committee has been set up to investigate this sort of problem, I would ask the Committee to say that this new proposal should not be accepted.

6.30 p.m.

I should like to say one or two words on this subject because my hon. and gallant Friend the Member for Camborne (Commander Agnew), whose name is down to the new Clause, is unable to be present. This is a matter of fairly common knowledge to those connected with this kind of industry and one which has existed for a long time. There are one or two instances where companies are working abroad, particularly in tin in Malaya and places like that. Where they have an office which is actually on the mine itself they will get the relief, but supposing that office serves two mines or two or three concerns together, or supposing it does not happen to be so closely connected as far as the location of the building is concerned; then it does not get relief.

There exists, therefore, a definite handicap to those mining industries which are of great value in developing mining abroad and earning dollars. It has been one of the troubles throughout the whole of the Income Tax laws as far as these companies are concerned. I believe it is the desire of every section of the House to help these companies overseas. It has already been admitted that it is essential to provide the relief for the office on the mine. I think it would be wrong if this Clause were withdrawn without some other hon. Member, in addition to my hon. Friend the Member for Chippenham (Mr. Eccles), who put the case strongly, protesting against this position. It is wrong that we should have this blank refusal by the Government to this comparatively small concession, which would be a dollar-earning concession.

The right hon. and learned Gentleman said, "It will come before a committee very shortly." That, of course, is a great help and it is a point as a result of which, to my mind, we should not be forced into the Divisional Lobby on this Clause. It is, however, a pity that the Government are always putting off these small matters, which are of great value to individuals and as dollar earners, and pushing them out to some other body.

If we really wish to develop our mining overseas, especially within the British Empire, a small concession such as this would be important. It is wrong to hit the mines simply because an office does not happen to be on the site. It is probably highly inconvenient in many cases to have it on the site. There may be several mines where it is not possible to have an office on each one of them; it may be the most economical thing to have one office in a central position dealing with all the mines. Surely the practical proposals in all these things should outweigh the other facts. I feel sure that my hon. Friend the Member for Chippenham, who has shown industry and capacity in this, has at any rate done a useful service in bringing it to the notice of the Committee and showing how completely incapable is the Treasury mind of appreciating, even in this sort of thing, how much the Treasury could do to help our industries abroad.

I think it is very unreasonable of the Solicitor-General to pass this off by saying that it will be looked at by the committee. We already have Clause 18, which alters the provisions of Part III of the Income Tax Act of 1945 without reference to this Committee. These alterations were the result of a special Departmental Committee and their Report. There is no logic in giving an allowance on the site but refusing it on the buildings on that site, because it may be that the buildings are worth more than one-tenth of the whole amount of the construction. I think this is a very foolish and an obviously arbitrary thing; and when we see something which should be put right we should put it right at once and, as my hon. Friend the Member for Torquay (Mr. C. Williams) said, we should not wait for the report of another committee.

I believe the Solicitor-General is right and that, the new Clause, as we have drafted it, appears to apply to all mines and not only to overseas mines. A very difficult problem arises in regard to mines in this country because they may have head offices in big cities and may bring up a comparison between the way we treat their offices and the way we treat the offices of other industries. I should be ready to withdraw my Clause, but I should like to put it down again, this time restricting it to overseas mines. If the Committee will agree, that is the course I would advise them to take. I, therefore, beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.