I beg to move Amendment No. 337, in page 13, line 9, to leave out paragraph (a) and to insert:
(a) activities carried on for office purposes within the meaning of section 1(2) of the Offices. Shops and Railway Premises Act 1963, but excluding
The effect of the Amendment is merely to add to what already appears in paragraph (a) under the definition of non-qualifying activities the words that appear in sub-paragraph (iii) of the Amendment. It is concerned, therefore, to rectify an anomaly that appears to arise in the case of shipping companies.
When one looks at the activities listed under Clause 2(3,a) one finds they include any heading in Order XIX of the Standard Industrial Classification other than heading 709, and, therefore, include activities under heading 704 which is entitled "Sea Transport," and is subdivided into three subheads, the first of which reads:
The shore establishments of companies (including railways) operating sea-going ships for conveyance of either passengers or cargo.
But it excludes fishing vessels as classified under heading 003.
Sub-head 2 merely reads:
Shipping company (sea-going personnel).
Subhead 3 is concerned with pilotage only, which does not concern this argument.
It is clear from Clause 2(2) that a shipping company fulfils all the requirements of paragraph (a) of that subsection, but because the bulk of shore-based
personnel will be employed in almost every case only for the non-qualifying activities associated with office administration, they do not appear to fulfil the 50 per cent. rule of paragraph (b) unless the employment of the sea-going personnel is to be regarded as, in the words of subsection (2),
… in, or carried out from …
those office establishments. Since the sea-going personnel are expressly included in Subhead 2 of Heading 704, one would expect that it was intended that they were to be included. I say "one would expect", although I must add that I lost a lot of my faith in either logic or common sense governing the Bill.
However that may be, and whether or not this is an inadvertent slip, or whether I have misunderstood the Bill, the Bill appears to contain an inherent contradiction in that, when we refer back to Clause 44 of the Finance Bill—which is, so to speak, the parent legislation of this Selective Employment Payments Bill—we find that the sea-going personnel are excluded from the payment of S.E.T. because of subsection (2) of that Clause and, secondly, that to determine whether a person is employed for the purpose of the Selective Employment Tax under the Finance Bill one is obliged, by subsection (9) of Clause 44, to resort to the definition of "employed persons" appearing in the National Insurance Act, 1965.
That Act defines "employed persons" as those
… gainfully occupied in employment in Great Britain, being employment under a contract of service …
It is clear that, by the very nature of the employment of deep-sea personnel, they are not employed in Great Britain, and it would, therefore, seem to follow that they are not employed persons for the purposes of either the National Insurance Acts or the Finance Bill provisions relating to S.E.T. If they are not employed for the purposes of the Finance Bill, it is very difficult to see how they can be employed for the purposes of this Bill, which rests upon Clause 44 of the Finance Bill.
If they are not employed, not only will S.E.T. not be payable in respect of these deep-sea sailors because of the special provisions of the National Insurance Act, but it would seem to follow that they cannot be taken into account for the purely head counting operation which is necessary to determine whether an undertaking fulfils the 50 per cent. rule of Clause 2(2,b). In that event, despite the specific inclusion of the minimum list Heading 704, the shipping companies will be excluded from Clause 2 because if their sea-going staff are excluded their employees will be overwhelmingly engaged in the non-qualifying office activities associated with the administration.
In this respect, the result will be a discrimination against the genuine private shipping company lines compared with the shipping services of British Railways or the nationalised airlines, which to a large extent compete directly with the shipping companies and not only qualify in respect of their engineering activities for a refund but for a premium. It would, of course, be a discrimination against an industry which in both earning and saving foreign exchange is important in relation to our balance of payments. I hope that this apparent contradiction will either be explained or put right, because I believe that it is rather more than an apparent contradiction.
Two other matters should be mentioned. Although, in most cases, I think the great majority of cases, the seagoing personnel will far exceed the shore-based personnel of a shipping company, there may be a few cases in which that is not so and even when the sea-going personnel are included there would be less than 50 per cent. of the total employees employed in, so to speak, productive activities. For this reason, the Amendment contains the qualification that the office personnel shall be included only where they are, in fact, a minority compared with the sea-going personnel.
It will be remembered that in Section 85 of last year's Finance Act special provisions were introduced in favour of companies managing and operating ships whether or not those companies actually own the ships they operate. There were provisions among other things for what have become known as management companies. It would be logical to expect the same principle to apply under this Bill. Hence the reference in the Amendment to operating of ships as well as management of ships and also to associated companies. In many cases management companies are not necessarily owners of the ships or their subsidiaries.
I refer back to the White Paper on the Selective Employment Tax and to page 16, paragraph 5, which makes quite clear that it was the intention that the shipping companies should be included in this neutral zone, that is, in receipt of refund. The first sentence of that paragraph says:
It is not intended that the tax should fall effectively upon transport, that is on establishments within order XIX of the Classification, with the exception of heading 709—Miscellaneous services and storage …
At the foot of the page there is a reference to shipping, airlines and inland waterways which, with ports and airports, will generally have the tax refunded, although there are exceptions such as shops and restaurants which have no bearing on the present argument.
I refer, also, to the Government Amendment No. 242, which we welcome so far as it goes. I am sure that the Minister appreciates that it does not cover this question, although it is welcome because it brings into this category such companies as oil companies which use and operate their own sea transport for the importation of their own goods.