Schedule 15 - Charge to income tax on benefits received by former owner of property
Finance Bill
4:00 pm
Mr Howard Flight (Shadow Chief Secretary To the Treasury, Economic Affairs; Arundel and South Downs, Conservative)
First, we welcome the provision, as we will in due course welcome Government amendment No. 137, but the situation is not as simple as the Paymaster General has described it. If I understand the amendment, in particular situations of concern—for example, where parents give capital to children to buy a house, then, much later in life, return to live with them—it all depends on there being a seven-year period between the parent giving the money and coming back to enjoy the benefit.
Record keeping will be required to establish the position. One of our objections is with the record-keeping burdens imposed on hundreds of thousands of non-rich, ordinary people. Even though amendment No. 137 may ultimately remove the concerns raised by many hon. Members, it would not do so without record keeping to establish that there was a seven-year gap during which the original donor did not enjoy any benefit.
Secondly, my right hon. Friend the Member for Fylde, who has left the Room, made an important contribution about the essence of, and the semantic debate about, the meaning of the word ''retrospective''. His point was that even the Inland Revenue website sets out the methods available to taxpayers to mitigate inheritance tax liabilities. The Paymaster General may have read the letter in The Times by Jeremy Woolf, QC, and she may even have seen his more substantial opinions backing up that letter. I think that, particularly in the overall context and practical consequences of inheritance tax, the issue is that the measures are retrospective on the individuals concerned, whatever clever semantics one wants to get up to.
Earlier, we touched on how the measures may not even bite, but the fact is that many people who made arrangements that were perfectly legal 18 years ago find that those are suddenly being overturned as they approach old age.
The Paymaster General earlier made what, I regret to say, I thought were ill-informed remarks about my making shallow comments about historic homes. I suggest that the Revenue work with the Historic Houses Association and plot through the perfectly genuine cases where people could not qualify for conditional relief. The Paymaster General made reference to chattels that were not sufficiently valuable to qualify. She should be aware that it is quite difficult to qualify for conditional relief. That relates to the principal point about retrospection.
With respect, the Paymaster General glossed over a major problem of families who have done their best to preserve a house and its collection and to hand it on, and who are not, otherwise, rich people. They have a motive that the Paymaster General may not approve
of, but they are going to find themselves either with a bill that they cannot afford to pay or having to sell the property and go to live somewhere else at the age of 75 or 80. That is not in the national interest.
The complexity produced by making the measures retrospective is still significant. Helpful though some of the Government amendments are, a great deal of investigation and evidence production is required to understand how they bite. We are still of the view that, in this territory, if one accepts that there is a big hole to be filled—which is itself debatable—the correct thing to do would be to fill it going forward.
In a sense, this problem is caused by a failure of Government to block holes in inheritance tax satisfactorily in the past. We are against what we view as, in practice, the retrospective elements, and we want to put the matter to the vote.