A jug of tap water; very good. One can get a jug of tap water here in the House but some restaurants look askance when one asks for a jug of water. The hon. Lady's point is extremely good.
Mr. Heath rather wisely stopped discussing the question of who has the best cheese. If we were asked what the worst cheese was, I would say those large pale things with big holes in them; nothing produced in this country, I can assure the hon. Gentleman. Bottled water is another of those continental habits that we have adopted, when we could simply turn on the tap to get a glass of safe, high-quality water for which we have paid an enormous amount.
On that very subject, I come to the issue of how small businesses pay their water rates. The chairman of Tiverton chamber of commerce Mr. David Westwood wrote to me to say:
"Our own offices in Tiverton share our office building with other businesses. The Ground Floor and the first floor are paying in excess of £3,000 a year in water rates. It is more extraordinary that the ground floor has no inlet or outlet water supply. The previous tenants...may also have paid unnecessary rates."
I had not realised, but it transpires that business rates are assessed based on the old rateable value, whether or not there is a water supply. Of course there will be a communal washroom that is shared with other businesses, so at some point there is a mains inlet and a shared waste disposal system. But that has no relevance to the amount of rates that different businesses in the same building might pay, purely because there are differentials in their traditional rateable values.
This is grossly unfair. Nobody minds paying for the service; if those mainly small businesses share the services that the water company provides, nobody is suggesting that they do not pay. However, this is a licence to print money on the part of the water company. The chamber of commerce has taken the matter up. Water companies have confirmed that the Government have allowed all water companies to continue raising charges based on rateable increases. So every year when the rates go up, businesses pay more and more for their water, irrespective of the number of people in the office; it may be a sole occupancy or they may be only a couple of people. However, they will pay an increasing charge for a restricted service.
In the example given to me, a bill charging £549.91 was calculated by multiplying the rateable value by £99.12 for water and £223.58 for sewerage despite the fact that in the office concerned there is no water or sewerage service. I know that the Minister will write to his ministerial colleagues about my concern about the domestic ratepayers. Will he also pick up on this matter? Small businesses are under pressure.
The Budget's changes in the burden on small businesses as a result of the rise in the small companies' rate from 20 per cent. to 22 per cent. will mean that the Treasury brings in £820 million of additional revenue. If the Chancellor is looking for a way to bring some relief to those small businesses that are paying excessive amounts for water services because of the formula, that would be a good place to start.
I come now to another small business case, in which I will refer to a constituent as Mr. E. The case could go into the legal domain; in fact, that is now being seriously considered. I do not want in any way to prejudice a case that may at some point be considered in a court. The case concerns the way in which HMRC has interpreted the Taxation of Chargeable Gains Act 1992. Mr. E and his wife ran a shop in the high street of one of my market towns for many years as a family business. They lived above the shop in a flat. On his retirement three years ago, he disposed of the shop and the flat at the same time. His accountant prepared the final accounts for the Revenue, and they were agreed and paid.
Two years later, the Revenue revisited those accounts and decided to challenge the apportionment of capital gains tax that Mr. E had paid and that the Revenue had agreed on the disposal. The reason was that although the flat was his prime home, and had been for 20 years, because he had disposed of the shop and the flat at the same time on retirement, the Revenue regarded that as a single asset. In looking at it as such, the Revenue argued that although he was of course able to offset the CGT liability on the flat—none of us has CGT liability on our prime residence—the taper relief that would have applied to the disposal of the business premises was affected. Therefore, the higher rate of CGT was applied to the business disposal, rather than the tapered relief that had previously been calculated. Without wanting to disclose too much about my constituent's personal details, the differential was in excess of £30,000 liability.
I have had correspondence with my constituent, his accountant and Treasury Ministers on the matter. I am astonished that the Revenue should be interpreting the Taxation of Chargeable Gains Act in that way. It is quite clear that, for all other purposes of taxation, when a person lives above a shop in that way, the two items—the flat and the shop—are treated separately for taxation. They are separate assets for council tax and business rates purposes.
The question has been put to me: was that what Parliament intended at the time? I have done research into the case and I am absolutely sure that it was not what Parliament intended at the time.
I sought some explanation from the Paymaster General, and I got a rather strange reply:
"the rate of taper relief is assessed by looking at the use to which the whole asset has been put."
That is pretty clear. It is a domestic flat with its own entrance and a garden at the back. She goes on:
"This rule might at first glance appear to produce an anomalous result"— it certainly does—
"However, it is the whole of the asset that is being disposed of, even if part of the gain on it is exempt."
Mr. Deputy Speaker, if you owned a shop but had a domestic dwelling somewhere else, or if you let out the flat over the shop as a business proposition, the measure would not apply. As we all understand, different tax rules would then apply.
We are getting very close to this being a test case. I and small business organisations will be assisting my constituent to pursue the matter as far as he needs to pursue it to get the right result. There are big implications throughout the country for every shopkeeper who lives above the shop and has an anticipation of what the tax liability may be.
If hon. Members—we are, after all, the legislators—look at the detail of the case, as I did, I am sure that they will agree that that is not what Parliament intended when that legislation came on to the statute book. In anyone's language, it is pretty clear how the measure should be applied to ensure fairness of the tax system.
It is to small business and the water rates that I have particularly addressed myself this afternoon. I add to colleagues' comments about the Minister. I know that he will take the matters that we raise today seriously and convey them to colleagues. In a previous existence of my own, he and I shared many an end-of-term Adjournment debate across the Dispatch Box. He was extremely diligent in the way he listened to Members' concerns, particularly when they related to their constituency.
I wish everyone—Members and the staff of the House—a very happy Easter, and do come and visit us in God's own county.