Relief For Allowable Losses
I beg to move Amendment No. 161, in page 14, line 24, leave out
and insert any preceding chargeable period '.'the two preceding chargeable periods'
With this amendment it will be convenient to discuss the following amendments:
No. 64, in page 14, line 24, leave out the two '.
Government Amendment No. 162.
No. 65, in page 14, line 25, leave out either of '.
Government Amendment No, 163.
No. 66, in page 14, line 28, leave out 'the later of those periods'
and insert a later period '.
No. 67, in page 14, line 30, leave out subsection (3) and insert:
' (3) Where the Board have determined under Schedule 2 to this Act that an allowable loss has accrued to a participator in a chargeable period from an oil field then if the participator so elects within six years of the end of such period the said loss shall be relieved by set-off against the assessable profit accruing to him in the same period from any other field or fields '.
These amendments provide for the indefinite carry-back of allowable losses within a field. As such, I am sure that they will commend themselves to the House.These amendments follow an undertaking which I gave in Committee to reexamine particular matters so that the participator would be able to set off losses against any previous profits on a field. Under the clause as drafted, a participator may elect to carry a loss back only against his profit from the field in the two preceding chargeable periods. The point has been made that the restriction to the carry-back of losses could be difficult and unfair where losses were incurred well into the life of the field. An example was cited of the problem that could arise where there might be an interruption of production and subsequent continuation. The point was made that those losses which were made during the cessation of production would be unrelieved. We have met that point. There are other amendments which no doubt the right hon. Member for Wan-stead and Woodford (Mr. Jenkin) will wish to move. I do not know whether the right hon. Gentleman would like me to refer now to Amendment No. 67. If the House feels that that is not the most convenient arrangement, I will leave the matter there and seek to catch your eye at a later stage, Mr. Deputy Speaker.
The Opposition warmly welcome Government Amendments Nos. 161, 162 and 163 as they entirely meet the points in Opposition Amendments Nos. 64, 65 and 66. Indeed, they meet the points which we made very forcibly in Committee. In the course of our debate in Committee on the Question "That the clause stand part of the Bill" the Minister of State recognised that there was something to be said for an indefinite allowance of losses backwards, and we are grateful for what he has done.The hon. Gentleman was quite right when he said just now that I should like to say a few words on Amendment No. 67. I am sorry that the hon. Member for Hamilton (Mr. Wilson) is not now with us. He was here a few minutes ago. It is my recollection that he was an extremely reluctant supporter of the Government in the matter of setting off losses in one field against the profits in another. The Government Whip was a regular visitor to our Committee. He has a very important oil company in his constituency, and we are delighted to see him here. I do not know what those hon. Members would think if they were told that these oil companies were making profits in some fields and losses in others and that the losses could not be set off against the profits. As I said to the hon. Member for Hamilton, what about the National Coal Board? If it had been making profits in its central coalfields in the East and West Midlands and had had to pay tax on those profits without any allowance for the losses which it was making in the coalfields in the North-East, or in Scotland, or South Wales, or Kent, the hon. Member for Hamilton would not have been the only mining Member in the House who would have created a bit of a fuss. Yet that is exactly what is proposed to be done by this Bill in relation to the oil companies. There is an iron curtain round each field for this purpose. Consider how far the Government have gone to perforate that iron curtain in the new clause which we considered earlier in connection with the abortive exploration and development expenditure and the closing down expenses of a field which has been operating for however long, and in spite of how much it has produced, when it finally closes down and makes losses. Apart from the capital—and I understand the argument about the capital—this is the only case in which one makes losses on one field and profits on another and yet one cannot set off the losses against the profits. One has to pay tax on the profits without receiving an allowance on the losses. The only relief is that if subsequently a profit is made in the field, the losses can be carried forward and set off against those profits, or one has the option to close down the field, in which case the ring fence comes off and the losses are set off against the profits in the neighbouring profitable field. Apart from the cash flow and the resultant disincentive, the only effect on the operations is that the balance could be tilted to securing the premature closing down of a field which might otherwise be carried on in an attempt to see whether it might become profitable. I cannot believe that this is the Government's intention and that they would want to restrict the loss relief in such a way as might force a company to close down a field when otherwise it might carry it on and win a good deal more oil for the country. I beg the Ministers to think again. They have moved so far in allowing losses to be set off in dealing with abortive exploration and abortive development expenditure. Having swallowed those horses, they are straining at a gnat. They ought to allow this final relief, off-setting losses against profits made in the same period in two different fields. I hope that the Minister will treat the matter sympathetically.
The right hon. Gentleman seeks to allow the losses of one field to be set off against the profits of another. No one will know better than he that the consequences are not necessarily those that he envisages. The effect would be virtually to abolish the field basis in terms of the tax flow. As a result, the amendment is unacceptable to the Government.
With respect, that is not the effect. We have not sought to reopen the lengthy debate on the field-by-field basis in any of our amendments on Report, because that matter was decided in Committee. The amendment does not interfere with the Government's field-by-field basis in the sense that capital allowances are freely transferable between fields. We are talking only about revenue losses, the setting off of an operating loss in one field against the profits of another.
I understand the point put by the right hon. Gentleman. What I am concerned with is the consequences of his amendment, which are to abolish the field-by-field basis in terms of the tax flow. As a result, it is obviously contrary to Government policy and contrary to the provisions that we have sought to maintain in the Bill throughout our lengthy discussions.The right hon. Gentleman is right to draw the attention of the House to the concessions that have been made. We have provided these concessions—the indefinite carry-back at the participators' option for the losses in a field ; insuring any losses unrelieved when a field is finally abandoned, whatever the level of production ; making sure that they can be set off against subsequent profits arising to the licensee or to another company in its group from another field. We have made a large number of concessions, making sure in each that we have retained this core of the field basis in terms of the tax flow. We are unable to accept the Opposition's amendment, and I urge hon. Members to accept the Government's amendment.
Amendment agreed to.
Amendments made: No. 162, in page 14,line 25, leave out ' either of those periods ' and insert ' any such period '.
No. 163, in line 28, leave out ' the later of those periods ' and insert
' a later chargeable period '— [ Mr. Dell.]