Clause 17. — (Amendments of Case Vii of Schedule D: Chattels Sold for £1,000 or Less.)

Orders of the Day — FINANCE (No. 2) BILL – in the House of Commons at 12:00 am on 25th May 1965.

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Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton 12:00 am, 25th May 1965

I beg to move Amendment No. 351, in page 13, line 12, to leave out from "the" to "disposal" in line 13 and to insert "market value on".

My intention is simply to be helpful and it may well be that what my colleagues and I propose in this Amendment is covered somewhere else in the Bill. If that is so, I should be delighted to have that assurance from my hon. and learned Friend the Financial Secretary to the Treasury. Our intention is to remove any positive encouragement to avoidance or evasion. I am sure that all hon. Members will be in favour of such an Amendment. Indeed, yesterday, hon. Members opposite made it clear that they were fair, reasonable and logical. At least, that is what they told us and, of course, we accept it. I am, therefore, able to assume that they will accept this Amendment.

I call in aid Clause 21(4), which uses the words, … market value and arm's length … in this connection. The words "arm's length" are used throughout the tax system and have been for a long time. Indeed, in Section 12(3) of the Finance Act, 1962, the same words are used. In this Clause, however, these words will not be used and I believe that this may leave a considerable loophole.

I would rather see a much simpler tax system and if, in this way, one could reduce the work of accountants and others in the professions, I would be delighted. I am speaking, of course, purely for my? self and not for my association. I might perhaps add that my association, when it speaks in connection with the Finance Bill, does not speak for me—which is, perhaps, not surprising because, on its executive, there is a member of the Front Bench opposite.

I make it clear in referring to this Amendment that I do not pretend that it would stop the search for methods of tax avoidance generally. Indeed, I never could. Of course, it is right that people throughout the country, taxpayers generally, should be able to look for methods of reducing their tax liability in the same way as hon. Members are entitled to claim the maximum genuine expenses and so reduce their own tax liability.

I submit that the Amendment would made the law sensible. I do not claim any more for it. Really to stop or slow down the desire for tax avoidance generally, we would need, as I have suggested on previous occasions, to widen the whole tax base and reduce the incidence of tax itself. From my experience, where the rates of tax are low there is a direct correlation with avoidance and evasion. This goes right throughout the tax system. We see it in Purchase Tax particularly. Where the tax rates are low, then the desire for avoidance is equally low and I would personally like to see a much wider tax base and a much lower tax rate generally. [HON. MEMBERS: "Hear, hear."] I hope that hon. Members opposite who are agreeing with me will cheer as much when I express my hope and expectation that the next Budget will contain, for example, a reduction of about 2s. in the standard rate of Income Tax.

The Chairman:

Order. The hon. Gentleman must keep to the Amendment. We have only one Budget to consider at the moment.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I was seeking to relate the Amendment, Dr. King, to the whole question of tax avoidance. But I realise that I must stick rigidly to the Clause. The Amendment seeks to delete a small loophole. Many loopholes will remain, and no doubt others will be found, but if my hon. and learned Friend is able to assure me that somewhere else in the Bill the point is covered, I will be delighted. Alternatively, if he does not like the form of words used perhaps he will accept the principle. As I have said, it is not possible to block all the loopholes and, indeed, I would not wish to do so, because to attempt it would entail going to totalitarian lengths. I trust, therefore, that I may have an assurance from my hon. and learned Friend on this point.

The Chairman:

It will, I think, be for the convenience of the Committee if we discuss, at the same time, Amendment No. 352, standing in the name of the hon. Member for Ashton-under-Lyne (Mr. Sheldon), in page 33, line 3, to leave out from first "the" to "disposal" in line 4 and to insert "market value on".

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

Without following my hon. Friend the Member for Heywood and Royton (Mr. Barnett) into a wider debate on tax avoidance, I think that I can give him the assurance that he seeks. As I understand, what he and his hon. Friends are concerned about is lest it should be possible for people, on disposing of chattels, to avoid tax by an arrangement whereby there is an artificially, low price in a sale which is not a sale at arm's length or, at the time of disposal, by gift at an artificially low valuation which would be relevant for the assessment of tax. That, however, is not so.

The reason is—if I can give a legalistic answer—that Clause 16(10) provides that Clause 17 must be construed as one with Chapter II of Part II of the Finance Act, 1962. That brings into operation the provisions of Clause 12(3) of the 1962 Act, so if it is a sale between connected persons or if the article is given away, then the market value will be substituted for

a consideration actually paid, or, equally, if there is no consideration, as in the case of a gift. I think that meets the point put by my hon. Friend.

Photo of Mr Joel Barnett Mr Joel Barnett , Heywood and Royton

I thank my hon. and learned Friend for that reply. I understand that Clause 16(10) means that the point is covered and I therefore beg to ask leave to withdraw the Amendment.

Amendment by leave withdrawn.

Photo of Mr Peter Walker Mr Peter Walker , Worcester

Dr. King, I thank you for listening to the representations of my right hon. Friend yesterday concerning the Amendment I am about to move and dividing up the debate on the short-term and long-term aspects. I speak on behalf of my right hon. and hon. Friends when I say that we prefer to debate this when we come to the long-term aspects of the Capital Gains Tax.

Therefore, I beg formally to move, in page 13, line 13, to leave out "one" and to insert "five".

The Chairman:

I would remind the Committee of the significance of what has been said by the hon. Member for Worcester (Mr. Peter Walker). Amendments No. 203, No. 204 and No. 205, all standing in the name of the right hon. Member for Harrogate (Mr. Ramsden) and the names of other hon. Gentlemen, which relate to Clause 29 and which we had proposed to discuss with the Amendment just moved, will now be taken and debated in full when the opportunity comes.

Question put, That "one" stand part of the Clause:—

The Committee divided: Ayes 200, Noes 194.

Division No. 128.]AYES[3.59 p.m.
Abse, LeoBuchan, Norman (Renfrewshire, W.)Diamond, John
Albu, AustenButler, Herbert (Hackney, C.)Doig, Peter
Allaun, Frank (Salford, E.)Callaghan, Rt. Hn. JamesDonnelly, Desmond
Allen, Scholefield (Crewe)Carmichael, NeilDriberg, Tom
Armstrong, ErnestCarter-Jones, LewisDuffy, Dr. A. E. P.
Atkinson, NormanCastle, Rt. Hn. BarbaraDunn, James A.
Barnett, JoelChapman, DonaldEdelman, Maurice
Baxter, WilliamCraddock, George (Bradford, S.)Edwards, Rt. Hn. Ness (Caerphilly)
Bence, CyrilCrawshaw, RichardEdwards, Robert (Bilston)
Bennett, J. (Glasgow, Bridgeton)Crossman, Rt. Hn. R. H. S.English, Michael
Blenkinsop, ArthurCullen, Mrs. AliceEnnals, David
Boardman, H.Dalyell, TamEvans Ioan (Birmingham, Yardley)
Boston, T. G.Davies, C. Elfed (Rhondda, E.)Fernyhough, E.
Bowden, Rt. Hn. H. W. (Leics S.W.)Davies, Harold (Leek)Fletcher, Sir Eric (Islington, E.)
Braddock, Mrs. E. M.Davies, S. O. (Merthyr)Fletcher, Ted (Darlington)
Bray, Dr. Jeremyde Freitas, Sir GeoffreyFletcher, Raymond (Ilkeston)
Brown, Hugh D. (Glasgow, Provan)Delargy, HughFloud, Bernard
Brown, R. W. (Shoreditch & Fbury)Dell, EdmundFoley, Maurice
Foot, Sir Dingle (Ipswich)MacCoil, JamesRhodes, Geoffrey
Fraser, Rt. Hn. Tom (Hamilton)MacDermot, NiallRichard, Ivor
Freeson, ReginaldMcGuire, MichaelRoberts, Albert (Normanton)
Galpern, Sir MyerMcKay, Mrs. MargaretRoberts, Goronwy (Caernarvon)
Garrett, W. E.Mackenzie, Gregor (Rutherglen)Robertson, John (Paisley)
Garrow, A.Mackie, John (Enfield, E.)Robinson, Rt. Hn.K.(St.Pancras,N.)
George, Lady Megan LloydMcLeavy, FrankRodgers, William (Stockton)
Ginsburg, DavidMacMillan, MalcolmRogers, George (Kensington, N.)
Gourlay, HarryMacPherson, MalcolmRose, Paul B.
Grey, CharlesMahon, Simon (Bootle)Ross, Rt. Hn. William
Griffiths, David (Rother Valley)Manuel, ArchieSheldon, Robert
Griffiths, Rt. Hn. James (Llanelly)Mapp, CharlesShinwell, Rt. Hn. E.
Griffiths, Will (M'chester, Exchange)Marsh, RichardShore, Peter (Stepney)
Gunter, Rt. Hn. R. J.Mason, RoyShort,Rt.Hn.E.(N'c'tle-on-Tyne,C.)
Hamilton, William (West Fife)Mellish, RobertShort, Mrs. Renée (W'hampton,N.E.)
Hannan, WilliamMendelson, J. J.Silkin, John (Deptford)
Harper, JosephMillan, BruceSilverman, Julius (Aston)
Hart, Mrs. JudithMiller, Dr. M. S.Slater, Mrs. Harriet (Stoke, N.)
Hattersley, RoyMilne, Edward (Blyth)Small, William
Hazell, BertMonslow, WalterSmith, Ellis (Stoke, S.)
Henderson, Rt. Hn. ArthurMorris, Charles (Openshaw)Snow, Julian
Herbison, Rt. Hn. MargaretMorris, John (Aberavon)Soskice, Rt. Hn. Sir Frank
Hill, J. (Midlothian)Murray, AlbertStones, William
Hobden, Dennis (Brighton, K'town.)Neal, HaroldStrauss, Rt. Hn. G. R. (Vauxhall)
Holman, PercyNoel-Baker, Francis (Swindon)Summerskill, Hn. Dr. Shirley
Howarth, Robert L. (Bolton, E.)Noel-Baker,Rt.Hn.Philip(Derby,S.)Swain, Thomas
Howell, Denis (Small Heath)Ogden, EricSwingler, Stephen
Hoy, JamesOram, Albert E. (E. Ham, S.)Taylor, Bernard (Mansfield)
Hughes, Cledwyn (Anglesey)Orme, StanleyThomas, George (Cardiff, W.)
Hughes, Emrys (S. Ayrshire)Owen, WillThomas, Iorwerth (Rhondda, W.)
Hunter, Adam (Dunfermline)Page, Derek (King's Lynn)Tinn, James
Hunter, A. E. (Feltham)Palmer, ArthurUrwin, T. W.
Hynd, John (Attercliffe)Pannell, Rt. Hn. CharlesWainwright, Edwin
Irvine, A. J. (Edge Hill)Park, Trevor (Derbyshire, S.E.)Walden, Brian (All Saints)
Irving, Sydney (Dartford)Parker, JohnWalker, Harold (Doncaster)
Jones, Dan (Burnley)Pavitt, LaurenceWhite, Mrs. Eirene
Jones, J. Idwal (Wrexham)Pearson, Arthur (Pontypridd)Whitlock, William
Jones, T. W. (Merioneth)Peart, Rt. Hn. FredWilkins, W. A.
Kelley, RichardPentland, NormanWilley, Rt. Hn. Frederick
Kerr, Mrs. Anne (R'ter & Chatham)Popplewell, ErnestWilliams, Alan (Swansea, W.)
Kerr, Dr. David (W'worth, Central)Prentice, R. E.Willis, George (Edinburgh,E.)
Lawson, GeorgePrice, J. T. (Westhoughton)Wilson, Rt. Hn. Harold (Huyton)
Lee, Rt. Hn. Frederick (Newton)Probert, ArthurWilson, William (Coventry, S.)
Lee, Miss Jennie (Cannock)Pursey, Cmdr. HarryWinterbottom, R. E.
Lever, L. M. (Ardwick)Randall, HarryWoodburn, Rt. Hn. A.
Lewis, Arthur (West Ham, N.)Rankin, JohnWoof, Robert
Lewis, Ron (Carlisle)Redhead, EdwardZilliacus, K.
Lipton, MarcusRees, Merlyn
McBride, NeilReynolds, G. W.TELLERS FOR THE AYES:
Mr. O'Malley and Mr. Howie.
Agnew, Commander Sir PeterCampbell, GordonGibson-Watt, David
Alison, Michael (Barkston Ash)Carr, Rt. Hn. RobertGiles, Rear-Admiral Morgan
Allason, James (Hemel Hempstead)Chichester-Clark, R.Gilmour, Ian (Norfolk, Central)
Anstruther-Gray, Rt. Hn. Sir W.Clark, William (Nottingham, S.)Gilmour, Sir John (East Fife)
Astor, JohnCooke, RobertGlover, Sir Douglas
Awdry, DanielCooper, A. E.Goodhew, Victor
Baker, W. H. K.Cooper-Key, Sir NeillGower, Raymond
Barber, Rt. Hn. AnthonyCorfield, F. V.Grant, Anthony
Barlow, Sir JohnCostain, A. P.Gresham-Cooke, R.
Batsford, BrianCraddock, Sir Beresford (Spelthorne)Griffiths, Eldon (Bury St. Edmunds)
Bennett, Sir Frederic (Torquay)Crawley, AidanGriffiths, Peter (Smethwick)
Bennett, Dr. Reginald (Gos & Fhm)Cunningham, Sir KnoxGrimond, Rt. Hn. J.
Berry, Hn. AnthonyDalkeith, Earl ofGurden, Harold
Bessell, PeterDance, JamesHall, John (Wycombe)
Biggs-Davison, JohnDavies, Dr. Wyndham (Perry Barr)Hall-Davis, A. G. F.
Birch, Rt. Hn. Nigeld'Avigdor-Goldsmid, Sir HenryHamilton, Marquess of (Fermanagh)
Black, Sir CyrilDean, PaulHamilton, M. (Salisbury)
Blaker, PeterDigby, Simon WingfieldHarris, Frederic (Croydon, N.W.)
Box, DonaldDodds-Parker, DouglasHarvey, John (Walthamstow, E.)
Boyd-Carpenter, Rt. Hn. J.Doughty, CharlesHarvie Anderson, Miss
Boyle, Rt. Hn. Sir EdwardDouglas-Home, Rt. Hn. Sir AlecHeald, Rt. Hn. Sir Lionel
Brewis, Johndu Cann, Rt. Hn. EdwardHendry, Forbes
Brinton, Sir TattonEyre, ReginaldHiley, Joseph
Bromley-Davenport,Lt.-Col.Sir WalterFarr, JohnHill, J. E. B. (S. Norfolk)
Brooke, Rt. Hn. HenryFisher, NigelHirst, Geoffrey
Bruce-Gardyne, J.Fletcher-Cooke, Charles (Darwen)Hooson, H. E.
Bryan, PaulFletcher-Cooke, Sir John (S'pton) Hopkins, Alan
Buchanan-Smith, AlickFraser, Rt Hn Hugh(St'fford&Stone)Hordern, Peter
Burden, F. A.Fraser, Ian (Plymouth, Sutton)Hornsby-Smith, Rt. Hn. Dame P.
Buxton, RonaldGammans, LadyHowe, Geoffrey (Bebington)
Hunt, John (Bromley)Monro, HectorSmyth, Rt. Hn. Brig. Sir John
Hutchison, Michael ClarkMore, JasperSpearman, Sir Alexander
Irvine, Bryant Godman (Rye)Morrison, Charles (Devizes)Stainton, Keith
Jenkin, Patrick (Woodford)Mott-Radclyffe, Sir CharlesStanley, Hn. Richard
Jennings, J. C.Munro-Lucas-Tooth, Sir HughSteel, David (Roxburgh)
Johnson Smith, G. (East Grinstead)Neave, AireyStodart, Anthony
Jopling, MichaelNicholls, Sir HarmarStoddart-Scott, Col. Sir Malcolm
Joseph, Rt. Hn. Sir KeithNicholson, Sir GodfreyStudholme, Sir Henry
Kaberry, Sir DonaldNoble, Rt. Hn. MichaelSummers, Sir Spencer
Kerby, Capt. HenryNugent, Rt. Hn. Sir RichardTaylor, Sir Charles (Eastbourne)
Kerr, Sir Hamilton (Cambridge)Onslow, CranleyTaylor, Edward M. (G'gow,Cathcart)
Kilfedder, James A.Orr-Ewing, Sir IanTaylor, Frank (Moss Side)
King, Evelyn (Dorset, S.)Osborn, John (Hallam)Thatcher, Mrs. Margaret
Kitson, TimothyOsborne, Sir Cyril (Louth)Thompson, Sir Richard (Croydon,S.)
Lagden, GodfreyPage, John (Harrow, W.)Thorneycroft, Rt. Hn. Peter
Lambton, ViscountPage, R. Graham (Crosby)Tiley, Arthur (Bradford, W.)
Lancaster, Col. C. G.Pearson, Sir Frank (Clitheroe)Turton, Rt. Hn. R. H.
Langford-Holt, Sir JohnPeyton, JohnTweedsmuir, Lady
Legge-Bourke, Sir HarryPitt, Dame Edithvan straubenzee, W. R.
Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)Pounder, RaftonVaughan-Morgan, Rt. Hn. Sir John
Lloyd, Rt. Hn. Selwyn (Wirral)Powell, Rt. Hn. J. EnochWalder David (High Peak)
Longbottom, CharlesPrior, J. M. L.Walker, Peter (Worcester)
Loveys, Walter H.Pym, FrancisWalters, Dennis
Lubbock, EricRamsden, Rt. Hn. JamesWard, Dame Irene
McAdden, Sir StephenRedmayne, Rt. Hn. Sir MartinWeatherill, Bernard
MacArthur, IanRenton, Rt. Hn. Sir DavidWebster, David
Mackenzie, Alasdair (Ross&Crom'ty)Ridley, Hn. NicholasWhitelaw, William
Mackie, George Y. (C'ness & S'land)Ridsdale, JulianWilliams, Sir Rolf Dudley (Exeter)
McMaster, StanleyRoberts, Sir Peter (Heeley)Wills, Sir Gerald (Bridgwater)
McNair-Wilson, PatrickRobson Brown, Sir WilliamWilson, Geoffrey (Truro)
Marples, Rt. Hn. ErnestRussell, Sir RonaldWise, A. R.
Maude, AngusSt. John-Stevas, NormanWood Rt. Hn. Richard
Maydon, Lt.-Cmdr. S. L. C.Scott-Hopkins, James
Meyer, Sir AnthonySharples, Richard
Mills, Peter (Torrington)Sinclair, Sir GeorgeTELLERS FOR THE NOES:
Mills, Stratton (Belfast, N.)Smith, Dudley (Br'ntf'd & Chiswick)Mr. McLaren and Mr. R. W. Elliott.

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I beg to move Amendment No. 121, in page 13, line 31, after "and", to insert"(a)".

Perhaps it would be convenient if, with this Amendment, we discussed also Amendment No. 122, in page 13, line 32, after "person", to insert: or(b) to persons who are acting in concert or who are, in the terms of paragraph 21 of Schedule 7 to this Act, connected persons". These Amendments are designed to ensure that the exemption limit for chattels under Clause 17 cannot be avoided by selling the component parts of a set of chattels one by one, in reality to the same buyer but through intermediaries who are either connected with him or acting in concern that whim. We have already had reference to this loophole in the Bill as it stands and quite clearly if we are to have this provision relating to a set of articles we must see that it cannot be avoided by the simple expedient of people being able to sell through an intermediary acting in concert with them.

Amendment agreed to.

Further Amendment made: In page 13, line 32, after "person", insert: or(b) to persons who are acting in concert or who are, in the terms of paragraph 21 of Schedule 7 to this Act, connected persons".—[Mr. MacDermot.]

Photo of Mr Niall MacDermot Mr Niall MacDermot , Derby North

I beg to move Amendment No. 123, in page 13, line 34, at the end to insert: but with any necessary apportionments of the reductions in tax, and in allowable losses, under subsections (1) and (2) of this section". This Amendment is designed to bring the present wording of subsection (3) of Clause 17 into line with the first and comparable pant of subsection (4) of Clause 29. There are similar words in Clause 29 and by an error they were omitted in the drafting of this Clause. The effect is to permit apportionments in cases where a set of articles is required for the purposes of this Clause to be treated as a single asset and where not all the articles comprising the set but only one or some of them are disposed of on a particular occasion.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.