§ Mr. Dorrell
Capital allowances are available to the owners of buildings in enterprise zones and of industrial buildings elsewhere. Where a building is sold within the first twenty-five years of its life, a balancing adjustment is made which brings the tax relief into line with the actual depreciation. In this way any excess tax relief given can be recovered. There is, however, a defect in the capital allowances legislation which enables the owner of a building effectively to dispose of his interest through the granting of a long lease without triggering any recovery of excess allowances. This is a weakness of which some taxpayers are aiming to take advantage.
We propose to bring forward legislation at Committee stage of the Finance Bill which will rectify this defect by imposing a balancing charge when a building on which capital allowances have already been claimed is leased for a capital sum. The new rules will apply to capital sums received by a taxpayer in respect of a relevant interest in a building which he has acquired on or after today.