Tax relief on State grants
Spring asked whether capital allowances could let Goodman offset its State grants against tax and whether this was a condition of aid. The Minister said the allowance was a general food-industry measure and that its benefit depended on the company’s tax liability.
I thank the Minister for responding to the query I raised on the Order of Business yesterday morning and I have just two supplementaries on that. While the Minister persists in saying that the total amount of State aid is the £25 million grant and the £5 million redeemable shares, surely now, because of section 25 of the Finance Bill, the company will have an opportunity of writing off the State grants against their tax liability? Will the Minister accept that through this device they will be able to write off up to £12.5 million in any one year? Secondly, was this a prerequisite sought by the Goodman group before they would conclude the deal?
Comment on this
No. I was very glad that the capital allowance provision was restored in the 1987 Finance Bill as an additional encouragement to the food industry because we want to get development there. We have a sufficient number of reports, particularly in the meat industry, the most recent being the 1985 sectoral report.
This programme is totally in line with the recommendations of that report. Section 25 of the Finance Bill, 1987, covered the general food industry. The benefit to any company, including this one, will depend on their tax liability and it will certainly not be in the region of £12.5 million because manufacturing companies pay a 10 per cent tax rate and virtually all the products resulting from this programme will be exported. Therefore, the lower rate will apply and the maximum tax liability is 10 per cent instead of the usual company tax of 50 per cent.