Orders of the Day — Finance Bill

Part of the debate – in the House of Commons at 12:00 am on 3 May 1962.

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Photo of Mr Henry Brooke Mr Henry Brooke , Hampstead 12:00, 3 May 1962

The first subsection of Clause 6 gives effect to the Budget proposals to reduce the great disparity between the existing rates of tax by substituting the three rates of 10 per cent., 25 per cent. and 45 per cent. for the previous four rates, and it also extends the tax at the new rate of 15 per cent. to confectionery, ice cream and soft drinks.

Any extension of the tax, as the House well knows, to an important new class of goods is liable to give rise to a number of unfamiliar problems in the industries and trades concerned, and that was the reason why the Chancellor fixed 1st May rather than Budget day itself as the date on which the new tax on sweets, soft drinks and ice cream would come into effect. The industries concerned made representations that this gave them not enough time, and my right hon. and learned Friend decided to postpone the operative date by a week until 8th May. That is the date given in the Clause.

My right hon. and learned Friend realises that this postponement does not give the manufacturers all the time that they would probably wish for adjusting their production to the fact that their goods will in future sell at prices which must take account of the new tax, but it gives them more time to adapt their accounting systems so as to meet the legal obligations which tax will impose, and that is the essential thing for them at the outset. I should like, on behalf of my right hon. and learned Friend, to express thanks to the organisations representing all the trades concerned for the practical help they have given to the Customs and Excise over the administrative arrangements for this new tax.

There is a special point about ice cream which I ought perhaps to mention. Some of the ice cream sold from ice cream vans or by small makers in shops is made at the actual time of consumption or just before it, from what are known in the trade, I understand, as complete ice cream mixes, substances which may require the addition of water, but which, apart from that, need only aeration and freezing. Some of the people who work in this way are traders on their own account and, therefore, would be legally liable to come under tax control as manufacturers of ice cream.

We propose to avoid that inconvenience for both them and the Revenue by making use of the power in Section 12 of the Finance Act, 1954, to assess tax on these complete ice cream mixes on the notional wholesale value which they would have as finished ice cream. This has the assent of the trade associations concerned. I mention this because a Treasury Order will be needed to apply Section 12 in the particular case of ice cream, and that Order has been tabled today and will come into operation along with the tax on 8th May. I thought I ought to take the opportunity of explaining to the House the reason for making that Order.

There is also a small point in subsection (2) of the Clause relating to soft drinks which perhaps I ought to explain. The subsection secures that where a drink is made up by mixing a taxable soft drink or soft drink concentrate with a drink which has borne revenue duty—to make, for instance, as I am sure the hon. Member for Sowerby often makes for himself, a shandy—or with a tax-free drink, to make—as maybe the hon. Member less often makes for himself—something like a milk shake, then tax will have been charged on the value of the soft drink constituent.

That, of course, would be the rule in the majority of cases, even without the subsection, where the mixing is done by the drinker himself, whether it was the hon. Member for Sowerby or someone else, or at a bar. The subsection secures that the same rules shall apply if the mixing is done before the point of consumption by a manufacturer who is a registered person under the Purchase Tax law.