Clause 26. — (Cancellation of Tax Advantages from Certain Trans- Actions in Securities.)

Part of Orders of the Day — Finance Bill – in the House of Commons at 12:00 am on 25 May 1960.

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Photo of Mr Tom Iremonger Mr Tom Iremonger , Ilford North 12:00, 25 May 1960

I entirely support my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) in his object. In particular, I support him regarding the need to eliminate the requirement to prove a negative. But, with great respect, I am not absolutely sure that by means of his Amendment my hon. Friend has entirely fulfilled that object.

I am sure that my hon. Friend the Financial Secretary knows the song: Standing on the corner watching all the girls go by. My hon. Friend is in the reverse position of having all the girls standing on the corner watching him go by, but no doubt one day one of them will catch him. However, it is not that side of the song which concerns me. It is the juridical implications. The Committee will recall that the song continues You can't go to prison for what your're thinkingYou can't go to gaol for the look in your eyes. That is really the objection both to the Clause as it is drafted and to the Amendment moved by my hon. Friend. Because surely what he is objecting to is the subjective nature of the test, and the Clause as drafted requires that the taxpayer should show that none of his transactions had as their object, or main object, the gaining of a tax advantage.

I agree with my hon. Friend that what goes on in a man's mind, what he intended to be the result of his action, is not a proper matter for judicial determination. But I am not at all sure that the test which is substituted by my hon. Friend is any better, because his test is what is the answer to a question based upon a hypothetical set of circumstances. My hon. Friend, as it were, asks the judge to say what the taxpayer would have done in certain circumstances, and I am not sure that is any better than asking him to say what was his object.

I suggest, therefore, that it would be better to insert the words in a proposed Amendment which I have put down, namely, that the test should be whether the taxpayer had a reason or reasons other than the obtaining of tax advantages…". My hon. Friend actually mentioned the word "reason" in presenting his case. I submit to the Committee that whether or not a reason exists is a proper subject for judicial determination, because one can decide in the light of ordinary business criteria what would be a reason for a certain commercial action. I suggest that the Committee should support my hon. Friend in his objection to the Clause in its present form, but I ask my right hon. and learned Friend to consider substituting, for the words of the Clause, words which will put upon judicial decision a test which can properly be made and not a subjective test or a test in answer to a hypothetical question.