H.M. TREASURY

EXPLANATORY NOTE

CLAUSE 87: RELIEF FOR CONTRIBUTIONS TO LOCAL ENTERPRISE AGENCIES ETC

SUMMARY

This Clause extends indefinitely the current period for tax relief for contributions by companies and unincorporated businesses to Local Enterprise Agencies, Business Link organisations, Training and Enterprise Councils, and Local Enterprise Companies which is due to expire on 1 April 2000.

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DETAILS OF THE CLAUSE AND REPEALS SCHEDULE

Subsection (1) of the Clause extends indefinitely the current period for tax relief in Sections 79(11) and 79A(7) of the Income and Corporation Taxes Act 1988. This is due to expire on 1 April 2000.

The Repeals Schedule

removes the current references to the expiry date of 1 April 2000 in Sections 79(11) and 79A(7) of the Income and Corporation Taxes Act 1988.

updates the description of the bodies approving Local Enterprise Companies because the references to the Scottish Development Agency and the Highlands and Islands Development Board in Section 79A(5)(b) are no longer appropriate. The functions of these two bodies have been taken over by the other bodies mentioned in the measure — Scottish Enterprise and Highlands and Islands Enterprise.

removes Section 145(1) Finance Act 1994 which amended Sections 79/79A to extend the period of relief to 1 April 2000. It becomes redundant.

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BACKGROUND NOTE

Since 1982 a number of measures have been introduced ensuring tax relief for contributions by businesses to various enterprise agencies.

The general tax rule is that only expenditure incurred wholly and exclusively for business purposes is allowed as a deduction when calculating business profits for tax purposes. Contributions to these various agencies might not always satisfy that test and the tax relief was introduced to ensure that tax relief was available.

Local Enterprise Agencies

In 1982 relief was introduced for an initial period of 10 years for business contributions to Local Enterprise Agencies (LEAs). The period of relief was later extended and currently expires 1 April 2000. LEAs promote or encourage industrial and commercial activity or enterprise in the local economy by providing legal, financial and marketing advice and advice on setting-up and running a business. LEAs may be set up in a number of ways, including as private companies limited by guarantee, or be representatives of a local Chamber of Commerce.

Training and Enterprise Councils/Local Enterprise Companies

In 1990 relief was introduced for an initial period of 5 years for business contributions to Training and Enterprise Councils (TECs) and Local Enterprise Companies (LECs). The period of relief was later extended and currently expires 1 April 2000.

TECs are private companies limited by guarantee with boards consisting mainly of local businessmen. They enter into agreements with the Secretary of State. TECs are designed to provide local training and business growth programmes responsive to the needs of the local community.

LECs are the Scottish equivalent of TECs. They operate under contract to the Scottish Enterprise, or Highlands and Islands Enterprise.

Business Link organisations

In 1994 relief was introduced for business contributions to Business Links for a period expiring 1 April 2000. Business Links provide a single point of access to local business advice and support services in England. Business Links are partnerships of TECs, LEAs, Chambers of Commerce, Local Authorities, and other local bodies with an interest in business support. Business Link partnerships are licensed by the Secretary of State to use the Business Link brand.

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