Chris Grayling: I want to raise an issue of clarification with the Minister and, if his clarification should prove disappointing, to stimulate thought within the Treasury about the classification of equipment used for the care of the elderly. That equipment may not fall under the definition of medical equipment, but under the auspices of the clause it is plausible that a company might make a donation of equipment to provide home care for the elderly. Such equipment is often discriminated against by the tax system. For example, VAT is payable on the purchase of stairlifts or handrails for the home. The clause may open up another discriminatory area against such equipment.
One can imagine a company donating to Age Concern, for example, a set of household care equipment for the elderly that the organisation could use for people who are in need of such equipment. My suspicion is that such a donation would not fall within the terms of the clause. Will the Minister consider making it an eligible area of equipment, by amending the clause and returning to it on Report or on another occasion?
Mr. Boateng: The clause introduces a new relief for corporate donations of medical supplies and equipment. It removes a potential tax charge on corporate donations of medical supplies made for humanitarian purposes and allows companies to deduct from their taxable profits the cost of transporting, delivering and distributing those goods. From 1 April, the new relief will encourage companies to donate medicines, medical supplies and equipment to developing countries without incurring a tax charge and in the full knowledge that the cost of getting donations to recipients will be tax deductible.
Column Number: 225This debate, engendered by the new clause, has been helpful, and I shall try to answer the points that have been raised. We want the provision to be enabling rather than regulatory. It would have been possible to take the approach suggested by the hon. Member for Arundel and South Downs and introduce a raft of regulations, but we chose an enabling approach, which was favoured in the representations that we received from the charitable sector and from industry. It maximises the flexibility of such bodies in determining how best to respond to the sort of philanthropic impulse outlined by the hon. Member for Epsom and Ewell (Chris Grayling) in his interesting example. Provided that companies comply with the requirements of the clause and the gift is made for humanitarian purposes, donors and recipients will have the assurance that gifts of medical supplies and equipment can be made without the donor suffering a tax charge.
The hon. Member for Arundel and South Downs favoured a different approach, whereby tax relief would be available only for goods given in accordance with regulations made by the Secretary of State. I do not understand why anyone would want to increase the burden of regulation, especially in this area. Instead of a clear enabling measure that will help willing donors and recipients to get together, the hon. Gentleman's approach would restrict relief to defined gifts in defined circumstances. In fact, it goes against the thrust of the argument of the hon. Member for Epsom and Ewell, and I shall return to his interesting point in a moment.
Mr. Flight: The point that the new clause seeks to make is clear. There seems to be some uncertainty about what falls within the definitions, which could be a deterrent and a hassle. In addition, there is the issue of potential drug dumping, which is not unknown, and we must find a straightforward way of dealing with that.
Mr. Boateng: I shall deal with the issue of drug dumping immediately. Within this enabling, rather than restrictive and over-regulatory, framework, we are seeking to encourage donors to comply with the World Health Organisation guidelines on drug donations, to which the guidance that the Inland Revenue issues to its inspectors will refer. That will ensure the appropriate conduct of donors. However, as the hon. Gentleman will be aware, the guidelines do not have legal force in the United Kingdom, and there would be a real problem in making entitlement to a statutory relief dependent on a code that has no legal force. Companies already receive relief for donations in kind made to UK charities, and there is no evidence to suggest that that has led to widespread abuse. We are extending the treatment of donations made for humanitarian purposes directly to other bodies such as overseas charities or public health authorities, and there is no reason to think that that will lead to misuse.
On the interesting point made by the hon. Member for Epsom and Ewell, I recognise the issue that he outlined as a real one. In a previous incarnation as Under-Secretary at the Department of Health, it gave
Column Number: 226me a great deal of cause for concern, and successive Governments for many years have been exercised as to where to draw the line. A proper debate is needed on the issue, but we cannot have it in the context of this narrow, focused measure.
There is an ongoing dialogue among Age Concern, Help the Aged, several other medical and old people's charities, the Department of Health and my Department about the issues. Guidelines are in place, but there are also lines to be drawn. I shall certainly explore the issue and give the hon. Gentleman in correspondence an indication of the aids that would come under the definition as it is in the measure and those that, frankly, would not at this time. We cannot deal with the wider and vexed issue as a side wind of the measure, but it is certainly well worth keeping under review.
Mr. Mark Field (Cities of London and Westminster): One issue that has not been raised is that of unincorporated businesses. I apologise if the Financial Secretary was coming to it. I appreciate that there is provision for sole traders to make various donations and receive tax benefits as individuals. However, in the City of London there are several large law firms, for exampleobviously, unincorporated businessesthat have been involved for a period of years in collective schemes that would fall within the confines of the measure. International law firms have international links through which they help in disasters. Has any thought been given to extending the provision to such businesses?
Mr. Boateng: I was about to deal with unincorporated businesses. Before the hon. Gentleman spoke, I was racking my brains to think of unincorporated institutions that were big enough or in a position to make such donations. If I was doing that, I suspect that others were as well, although, obviously, I cannot know. However, the hon. Gentleman's intervention has helped concentrate my mind. I, too, can think of law firms that undoubtedly have made similar donations in the past in response to appeals from organisations such as Afro-Aid and others. The issue is worth exploring, and I shall do so. If evidence shows that there is a capacity on the part of unincorporated businesses to make such donations, we are certainly prepared to consider an extension. I shall reply to Members on the issue before Report.
Mr. Flight: Another example would be new businesses constructed as limited partnerships in the venture capital world, which may be doing important work of that nature.
Mr. Boateng: I am grateful for that comment. If hon. Members have practical examples of unincorporated organisations that are thinking of, or might be in a position to, make similar donations, it would be helpful if they could give them to me so that we can explore the issue to see how we might make provision for them. I hope that with that assurance the clause will be given a fair wind.
Column Number: 227Mr. Flight: I have one final question. The Financial Secretary said that the definitions will be covered by IR guidance based on WHO guidelines. My fourth question is whether, in the event of a disaster, emergency recovery would be covered, as opposed to a broad humanitarian course. It may be intended, but clarification would be helpful.
Mr. Boateng: A donation will be treated as having been made for humanitarian purposes if it is genuinely appropriate to the needs of the recipient. Therefore, if there is a genuine need of recovery in the circumstances that the hon. Gentleman's describes, it will count as humanitarian. The definition is not meant to be restrictive; it is to ensure that donations are appropriate. It is designed to achieve in an enabling way exactly what the hon. Gentleman would seek to achieve in a regulatory or restrictive way. I assure him that the Inland Revenue's approach to the definition of ''humanitarian purposes'' is and will be as I have outlined.
Mr. Flight: I thank the Financial Secretary for that reply, but I should like further clarification. In the event of a disaster, there are medical needs but also the separate issues of food, housing and other things that fall under the category of supplies. Is the right hon. Gentleman saying that the provision would be limited to medical equipment?
Mr. Boateng: I am. The clause is limited to medical supplies and equipment for humanitarian purposes. It is not meant to deal with food relief, which the hon. Gentleman will appreciate is a different form of relief.
Issues about the definition of medical suppliessuch as whether the preparation of instant food for young babies comes under foods or medicinescannot be resolved here. Such borderline issues will be interpreted by the Inland Revenue, as usual.
Mr. Flight: I thank the Financial Secretary. All of our concerns have been answered, although I look forward to him addressing the unincorporated business issue.
Question put and agreed to.
Clause 54 ordered to stand part of the Bill.
Clause 55 ordered to stand part of the Bill.
Schedule 15 agreed to.
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