Finance Bill

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John Healey: As the hon. Gentleman says, the intention of the new clause is to extend enhanced first year capital allowances for SMEs to expenditure by lessors, which are normally large businesses, on the equipment leased to SMEs. The advocates of that move generally argue that part of that benefit to lessors could be passed to SMEs, but nothing in the new clause would require them to do that. I am not convinced that any consequent reductions in rental

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costs to SMEs would be more than marginal. If that is right, the high Exchequer cost—almost £500 million over 3 years—would be entirely deadweight. That does not represent good value for money.

We originally introduced the first year allowances to address the cash-flow constraints faced by smaller businesses and to provide a boost to small business investment. Smaller businesses that lease their plant and machinery do not face the same cash-flow problems because their rental payments are spread over the life of the lease.

As part of the ongoing reform of corporation tax, we are including the tax treatment of leased assets, and we will consider further whether the capital allowance system can be modernised in order to produce a regime that is modern and competitive. We explained that in regular meetings that we had with the Finance and Leasing Association, which was the main proponent of the new clause. The CBI is heavily involved in the corporation tax reform process, so it is also aware of the consideration that we are giving to these issues.

Mr. Flight: I am glad that the Government are looking at addressing the underlying issue by other means, and I take on board the point that there is no guarantee that the leasing benefits would be passed on, although commercial forces argue in that direction. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 5

Expenditure incurred in installing access ramps

    (1) The Capital Allowances Act 2001 is amended as follows.

    (2) In section 23(2) after ''section 29 (fire safety)'' insert—

    ''29A (ramps for disabled access)''

    (3) After section 29 insert—

    ''29A Ramps for disabled access installed by small or medium-sized enterprises

    (1) This section applies to expenditure if a small or medium-sized enterprise carrying on a qualifying activity has incurred it in installing ramps required to facilitate access by disabled persons to premises which the small or medium-sized enterprise uses for the purposes of the qualifying activity.

    (2) A small or medium-sized enterprise installs ramps required to facilitate access by disabled persons if the installation is or will be required to comply with section 21 of the Disability Discrimination Act 1995.'.—[Mr. Flight.]

Brought up, and read the First time.

Mr. Flight: I beg to move, That the clause be read a Second time.

The Chairman: With this it will be convenient to discuss new clause 13—Expenditure incurred in improving accessibility for disabled persons

    '(1) The Capital Allowances Act 2001 is amended as follows.

    (2) In section 23(2) after ''section 29 (fire safety)'' insert—

    ''29A (disabled access)''.

    (3) After section 29 insert—

    ''29A Disabled access

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    (1) This section applies to expenditure if a person carrying on a qualifying activity has incurred it in making adjustments within subsection (2) below to premises which he uses for the purposes of the qualifying activity.

    (2) The adjustments referred to in subsection (1) above are those specified in subsection (3) below which are or will be required to comply with section 21 of the Disability Discrimination Act 1995.

    (3) The specified adjustments are—

    (a) installation of ramps to facilitate either access to the premises or use of the premises by disabled persons, and

    (b) alterations to the premises to provide accessible toilets for disabled persons.''.'.

Mr. Flight: New clause 5 has been tabled at the request of the CBI. It provides for capital allowances under the Capital Allowances Act 2001 to be available for expenditure incurred by installing ramps to facilitate access by disabled persons in order to comply with section 21 of the Disability Discrimination Act 1995. I understand that new clause 13 in effect proposes the same measures.

The Disability Discrimination Act imposes a duty from 1 October on providers of services to take reasonable steps to facilitate disabled persons wishing to make use of their services. That extends to making physical alterations to premises used to provide services.

In many cases, alterations to premises made by businesses will not qualify for immediate tax relief against profits. Therefore, it is proposed that expenditure on ramps required to facilitate the use of premises by disabled persons should be classified for tax purposes as expenditure on plant and machinery, thus qualifying for capital allowances. That would follow the established precedent of capital allowances for fire safety expenditure.

I understand that research carried out by the Disability Rights Commission of the Department for Work and Pensions suggests that many businesses do not have plans to carry out the necessary alterations to their premises. It is therefore arguable that an incentive is needed to encourage action by the Government's deadline of 1 October if they wish that to be met.

Mr. Laws: New clause 13 is very similar to new clause 5, although it is slightly wider in scope. It allows for the same reliefs in respect of alterations to premises to provide toilets that are accessible to disabled people, but it does not focus narrowly on the issue of small and medium-sized enterprises.

The new clause was suggested by the CBI and the Disability Rights Commission, and is supported by them. The commission sent us a note on the issue on behalf of itself and the CBI, in which it states:

    ''Our organisations believe this provision is vital to getting businesses ready for the October 2004 duties on physical access - without such incentives we fear progress will continue to be slow and disabled people will continue to be denied vital opportunities.''

Given the CBI's support for both the new clauses, it will not surprise you, Sir John, to know that my briefing note looks rather similar to that of the hon. Member for Arundel and South Downs. To save myself any embarrassment, I will not read out the same

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comments as him, but I will highlight two points. First, there seems to be a precedent for using these particular capital allowances for purposes other than standard business investment. He cited the established precedent of capital allowances being used for fire safety precautions.

Secondly, a big move is under way to try to ensure that business premises and other premises with public access are accessible and disabled-friendly, although I suspect that there is an awfully long way to go, if the area in which I live is characteristic of the rest of the country. There is a lot of expensive work to be done to convert premises into disabled-accessible buildings with vital facilities such as accessible toilets. In light of the amount of investment going into that, and the difficulty with meeting Government targets, I hope that the Government will respond positively to these new clauses.

Ruth Kelly: As hon. Members are aware, the Government undertook, in their manifesto, to establish comprehensive and enforceable civil rights for disabled people, so in many respects we have no quarrel with the underlying motivation for the new clause. Hon. Members also know that the requirement on service providers to make their premises reasonably accessible will come into effect in October.

After careful consideration of the proposed new clauses, we are not convinced that the proposed changes to the tax system would be the best way in which to improve rights for disabled people. Let me explain our reasoning. First, the new obligations will apply to all service providers, whether in the public, private or voluntary sector, so it could well be seen as unfair to give special financial support only to private sector businesses, particularly as it is often in businesses' financial interests to make such adjustments, as there are several million disabled people in the UK, and one in four customers is disabled.

Secondly, and perhaps of more interest to businesses, it is clear that many of the adjustments needed to meet the requirements of the Disability Discrimination Act, including some of the most expensive adjustments, already qualify for tax relief as either a revenue expense, or through capital allowances. The Inland Revenue is currently working on guidance to remind businesses about the tax relief available for the most common types of disability extension. That guidance will be available before the Act comes into force.

It is true that structural alterations to most commercial buildings are not covered by the capital allowances regime, but we are considering the possibility of introducing such an allowance for commercial buildings in the wider context of our ongoing corporate tax regime. To introduce special allowances at this late stage, when the Act has been in place for some years, could be seen as being unfair on businesses that have already made the necessary adjustments.

More generally, research to which hon. Members have already referred, which was commissioned by the Disability Rights Commission and the Department for

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Work and Pensions and published in 2002, found that, although cost is a factor in the time that change is brought about and the manner in which it is implemented, it does not have a great influence on whether a change is made at all.

For those reasons, I urge the hon. Gentleman to withdraw the motion, and urge the Committee to reject the new clauses if they are pressed to a Division.

11.15 am

 
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