COUE 18.77
MR MACDONALD
www.
IC2
GEC AND HONG KONG
COMMERCIAL IN CONFIDENCE
Reference......
cc Mr Willott
Mr Havelock (MEPT)
Following Mr Lippitt's meeting with GEC on Friday I have sketched out in the attached note one possible way of setting up the package operation. This is I think the kind of arrangement that Mr Lippitt had in mind.
2
The objective is to put together a package that would appeal to Hong Kong, without imposing main contractor status on GEC and without going outside the powers of the CEGB, and the scheme aims to take maximum advantage of the tax allowances available to UK companies for investment in plant and buildings. These allowances are available to any resident UK company regardless of the location of the assets concerned.
3
There are a number of tax problems involved:-
а the lease and lease-back arrangement with CLP;
b
the consortium arrangement with the banks;
the transfer of ownership of the plant etc at the end of the lease period.
On all of these it would be necessary to seek advance clearance with Inland Revenue. First, to ensure that the arrangements did not infringe any of the anti-avoidance provisions which operate in these areas. Secondly on the policy of using the consortium relief provisions in this way. I mentioned to you
that a consortium leasing arrangement has been used recently in a deal involving Harland & Wolff. This ran into serious opposition from Inland Revenue and Treasury and Cabinet approval for the deal owed much to Harold Lever's determination to see the scheme through. Inland Revenue and Treasury are opposing a repeat of the scheme as the basis for a shipping deal with Poland and aim to introduce changes in the tax rules. It is therefore likely that we would run into stiff opposition to using tax leasing as the basis for the Hong Kong deal.
RAELLEW
RA CHEWES
IC/1
Room635 V/S 215-5476
16 May 1977
بدید
COMMERCIAL IN CONFIDENCE
F