Clause 69 - First-year allowance to be available for ships and railway assets

Finance Bill – in a Public Bill Committee am 2:30 pm ar 11 Mehefin 2013.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Question proposed, That the clause stand part of the Bill.

Photo of Catherine McKinnell Catherine McKinnell Shadow Minister (Treasury)

Clause 69 would remove the current general exclusion from first-year allowances of expenditure incurred on railway assets and ships. There are a number of general exclusions from first-year allowances where expenditure is incurred on ships and railway assets, as they previously received beneficial treatment elsewhere in the capital allowances code; that beneficial treatment has recently ceased.

I understand that clause 69 would remove the anomaly to ensure that first-year allowances are available for expenditure on railway assets and ships. It ensures that FYAs are available for expenditure on energy-efficient and environmentally beneficial plant and machinery and function more generally as green incentive measures for the railway and shipping industries. That is to put in context the question I have for the Minister.

The measure is obviously welcome where it helps to provide a level playing field for investment in the railway and shipping industries. We particularly welcome the additional incentives that it will provide for the industries to invest in energy-efficient and environmentally beneficial plant and machinery. Will the Minister clarify how many companies the measure could benefit and give an indication of the additional levels of investment the Government anticipate as a result of the measure?

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

The clause makes changes to the Capital Allowances Act 2001 to give investors in ships and railway assets access to first-year allowances. The changes ensure that investors in those assets are treated consistently with others investing in similar assets in different industry sectors.

For those investing in certain types of plant and machinery, 100% first-year allowances are available. That provides businesses with a cash-flow advantage over normal writing-down allowances and acts as an incentive to invest in particular types of plant and machinery.

However, not all expenditure incurred by business is eligible for first-year allowances. There are a number of general exclusions, including those for expenditure incurred on both ships and railway assets. The exclusions for those two asset classes exist because both ships and railway assets have received beneficial treatment elsewhere in the capital allowances code. That beneficial treatment was, however, time-limited and has recently expired.

Therefore, to ensure consistency of treatment across the capital allowances code, the clause removes the general exclusions from first-year allowances of expenditure incurred on ships and railway assets. Providing access to energy-saving and environmentally beneficial first-year allowances will also encourage investment in green technologies in the ship and railways industries

The hon. Lady asked whether the measure will have a positive impact on investment decisions. Although we would not expect any extra trains or ships to be bought as a result of the measure, access to first-year allowances offers an incentive for UK infrastructure projects to procure the most environmentally friendly plant and machinery where such a choice exists. To the extent that businesses respond to this signal—indications from the representations that we received from the rail industry show a positive response, although the latest energy or water-efficient equipment may be more expensive—there could be some slight increase in investment.

In conclusion, the clause supports the Government’s objective of promoting fairness in the tax system and the removal of the exclusions. It allows investors in ships or railway assets access to first-year allowances and removes an anomaly in the legislation that denied a relief available to other investors in similar assets in different industry sectors. It also provides access to energy-saving and environmentally beneficial first-year allowances that will encourage investment in green technologies in the ship and railways industries. For that reason, the clause should stand part of the Bill.

Question put and agreed to.

Clause 69 accordingly ordered to stand part of the Bill.