HC Deb 23 May 1963 vol 678 cc677-89

Question proposed, That the Clause stand part of the Bill.

Mr. Barber

I want to clear up one point about which there seems to have been some misunderstanding. The Com- mittee will recall that at an earlier stage I explained the general purpose of the Clause, and referred to it on a number of occasions when we were discussing Schedule 7.

I want to make it clear that the charge will extend only to people who are in law occupiers. This term excludes an employee who is required to live where he does for the proper performance of the duties of his employment, because such an employee is no more than a representative occupier—that is, he is on the premises merely as representing his employer. His employer is regarded by the law as the true occupier.

Representative occupiers have not been taxed in the past under Schedule A on the value of their occupation, and they will not be taxed under the Clause. We have considered whether, in order to make the position clearer, we should set out in the Clause some description of what is ment by representative occupiers who are not covered by the Clause.

The difficulty, as the hon. and learned Member for Kettering (Mr. Mitchison) will appreciate, is that the distinction between the occupier, who is within this Clause, and the so-called representative occupier, who is outside it, rests on a long line of decided cases in which the courts have said that the term "occupier", in relation both to Income Tax and to rating, does not include the person who lives in accommodation because he is required under the terms of his employment to live there for the proper performance of the duties of his employment. Where this condition is All-filled he lives on the premises merely as a representative of his employer, and the true occupier is the employer.

Persons who have been held by the courts to be representative occupiers, and so to be outside the Clause, include the police superintendent who is required to live in a house adjoining and belonging to a police station, the bank manager who is required to live on the premises, the Methodist minister, who is required to live in a manse provided by the circuit, and the colliery manager who is required to live in company premises near the pit head. Other persons excluded by the Inland Revenue are caretakers, some school masters who are obliged to live on the job, and farm workers living in tied cottages.

The important point is that in this Bill there is no change whatsoever in the principles which govern the question whether a person is an occupier proper or a so-called representative occupier. The principles which will apply on this point after the passing of this Bill are the same as those which have applied hitherto for the purposes of Schedule A. It was because I had received a number of letters from hon. Members on this point, and because they thought that there was some extension of or change in the distinction between an occupier and a representative occupier, that I thought that it would be helpful to say, on this occasion, that that is not so.

Mr. Douglas Houghton (Sowerby)

The Committee is obliged to the Financial Secretary for that explanation. It sets at rest some of the doubts and anxieties which have been expressed by hon. Members on both sides of the Committee. Perhaps he will clear up a little later—or immediately, if he cares to do so—the position of police officers. He mentioned the case of the police superintendent who is required to live in a house adjoining a police station. There are many police officers who, while not required to occupy a house adjoining a police station, are nevertheless required to occupy a house provided by the police authorities. We should like an assurance that such representative occupiers, as they are described, will not be caught by Clause 45.

I was interested in the references to and definitions of occupiers which do not appear in the Clause and to those which are exempted by the Clause. The Clause deals with certain types of occupier without clearing up any doubts about other kinds of occupier. When we were discussing Schedule 7 I said something about Clause 45 being an anti-avoidance Clause as much as anything else, and the Financial Secretary said that he did not think he could go as far as that. But it seems clear that a lot of people have been occupying accommodation made available to them by their employers and have neither paid tax on the amenity value of the accommodation nor paid more for it than the tax on the actual Schedule A valuation.

During the Second Reading debate the Financial Secretary explained that those who pay no rent are nevertheless required to pay Schedule A tax. Since they have no rent from which to deduct the tax, the burden of that tax fell on them. Even if it did, it was good value for money. They paid only the Schedule A tax and not the full rent for the accommodation. Nor were they taxed on the full value of the accommodation. So there has been a great deal of untaxed amenity value here in one way or another.

There are a number of employers who, when officers are transferred or otherwise, offer accommodation on different terms to employees. Presumably that type of accommodation, in which the officers are not required to live, will come within the terms of Clause 45. The Financial Secretary referred to people required to live in the premises for the proper performance of their duties. A police officer could be required to live in certain accommodation in order to be in a particular place and available for the purposes of his duty in a more convenient manner, and would presumably, therefore, be exempt from the provisions of Clause 45. The Parliamentary Secretary can clear up that point.

Subsection (3) deals with the definition of "being available" to a person, and the Parliamentary Secretary has just explained that the Clause will deal only with those who are occupiers. Is this watertight? I do not know. There are some queer goings on in the hidden world of business and commerce, and one comes across cases where directors and executives seem to have facilities for the occupation of accommodation which, I suppose, could be regarded as available to them. But it might not be regarded as accommodation which they are required to occupy for the proper performance of their duties. If a managing director, for example, is asked by his firm—required by his firm, if hon. Members wish—as part of the conditions of his contract to occupy a luxury flat in the West End of London in order to be on the spot to entertain business guests and to present a certain posture of prestige and affluence to the community at large, does that requirement turn him into a representative occupier? I think that the Financial Secretary must have enough material at his disposal to answer, and I am sure that he is adequately briefed to throw more light on this matter for the benefit of the Committee.

5.15 p.m.

Now that we are on this point, the dog may as well gnaw this bone and get the most out of it. The opportunities are few and far between. When we wish to put down new Clauses or Amendments with this sort of object in view, we are harassed by the Standing Orders or rules that we cannot put down things which will impose, directly or indirectly, a charge upon the citizen. So when we do get something which will achieve something along the lines that we wish we may be forgiven for pursuing the matter as far as seems right and proper. I hope that the Financial Secretary will be able to give an assurance.

We have disposed of Schedule 7. I was fully in agreement with what the Schedule proposes to do in relation to this Clause. The explanation by the Financial Secretary during the Second Reading debate seemed to suggest that this had been done because Schedule A was being abolished. But it seems to me that there was a case for doing something on these lines long before Schedule A was abolished. Since there is now no Schedule A in the background for the purpose of assessing the value of this accommodation, it is necessary to recreate in this special connection that elusive person the "hypothetical tenant". We have chased the hypothetical rent all round the houses. My hon. Friend the Member for Dunbartonshire, East (Mr. Bence) has pursued the hypothetical tenant with his hypothetical rent into a great and infinite variety of hypothetical situations, and we are not encouraging my hon. Friend to try to do the same kind of thing again this afternoon.

I think that Schedule 7 is right in this connection, that we should erect a value under current letting conditions, current values, in order to apply it to Clause 45. We can no longer apply Schedule A. It has gone, and something has to be put in its place. I think that we are reassured on subsection (6) which will stop a person hiding behind his wife's occupation in order to avoid the consequences of this Clause. I shall have to take sub- section (3) and the definition of being available to as being the best which could be done with the definition which is, of course, fundamental to the application of the Clause.

I have given a blessing to Clause 45, for which the Financial Secretary will be grateful. We should like to know that it does exclude persons who surely ought to be excluded, and we hope that it will catch the people who ought to be caught.

I am glad that the Financial Secretary gave an explanation before it was necessary for me to rise to ask for one. Earlier I rebuked the occupants of the Treasury Bench for becoming slovenly and said that when a Clause came along it was their duty to explain what the Clause was about. I rather thought that the Treasury Bench was slipping. was about to say that perhaps we could get some understanding of the rules in this matter.

We do not ask a Treasury Minister to rise and explain a Clause when we know what it means, although we may ask him to explain a Clause when we want to lay a snare for the Minister, as in the case of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) on Clause 43. [An HON. MEMBER: "Oh dear."] Well, he fell into something, did he not? We thought there was a genuine tax relief being given, but we found it was merely making honest people of those who had been avoiding the tax far some years past. That certainly was a revelation. It followed the Government's well-known policy of when they are unable to enforce the law to change the law so as to remove further opportunities for breaking it. That is what they did with regard to betting, and one day they will do it with regard to the speed limit. They have done it in connection with Income Tax. The assurances for which we ask can no doubt be given both as to exemptions and those to be included under the Clause.

Mr. Graham Page (Crosby)

I hesitate to rise to comment in case I should qualify as one of the dogs of whom the hon. Member for Sowerby (Mr. Houghton) spoke, or as one of the snares referred to in relation to the hon. and learned Member for Kettering (Mr. Mitchison). Although I must humbly congratulate my hon. Friend the Economic Secretary on the admirable summary of the law he gave, unfortunately the General Commissioners, the Special Commissioners and the judges are not apt to read speeches made by my hon. Friend in this Committee. Although he may have set out the law very fully and ably, I should have thought it better to state it in the Clause itself.

There must surely be a reasonable definition of a service tenant as opposed to an occupier. We find again and again in the law a distinction is made between the two, but that does not mean that the service tenant is not an occupier. That is where the confusion arises in the wording of this Clause. It speaks of "the occupier", a phrase which is comprehensive of the service tenant, the person who is in a house by reason of his employment. On a first reading one would have thought it included many of those categories which my hon. Friend excluded.

I should have hoped that some words could have been put into the Clause to make perfectly clear who are caught by it and who are not caught. I can think of instances which my hon. Friend has not mentioned, such as the brewery manager. There are many such as those on whom the hon. Member for Sowerby touched. There are directors of companies who have show houses for the purpose of entertaining. I do not say that is wrong. It is a form of advertisement, a form of sales promotion; but where do we class them under this Clause?

My second question on the Clause is about annual values. I shall not go back to the discussion on the Seventh Schedule, but it is important in this connection to know how the man who is to be taxed under this Clause shall know what the figure of annual value is. At present he knows the Schedule A value, but the only clue he has in this Clause is that annual value is to be determined in accordance with the Seventh Schedule. By whom and when will it be determined? How will he know the figure? When does his taxation under this Clause commence? From what date does it start, and when does it come into effect against P.A.Y.E.?

This is against Schedule E, and it will he puzzling to the man coming within the Clause when he is called upon to pay a substantial amount of increased tax because, whereas he was allowed Schedule A, it will now be annual value, which will be three or four times as much as the previous figure. He will want to know from when that is to start, when he will know definitely what the figure is, and when it will be taken into account against his P.A.Y.E.

Mr. Cyril Bence (Dunbartonshire, East)

I have a question to ask in respect of this Clause. I was about to ask two questions, but one of them has now been answered. I was going to ask about the lighthouse keeper, but I now understand that he would be in the same position as a janitor. I want to ask, first, about the "representative occupier" and the adding of his emolument to his income because he lives in a house which is part of the job he has taken.

In the development districts, local authorities provide houses for key workers in some industries. This happens particularly when a company takes a factory in a development district in Scotland. The company gets into touch with the local authority which provides a dozen or twenty houses for key workers. Workers occupy those houses because they are taking jobs as key workers. This happens in my constituency. The annual rent of many of these houses is lower than the annual gross value. Those men cannot be said to be "representative occupiers" because the houses are owned by the local authority and they are not representatives of the local authority. The houses are not owned by the company employing those workers. Can those workers be caught by this Clause?

A skilled worker may go from a Rootes factory in Birmingham to a factory at Linwood and the local authority provides a house, but the rent is lower than the gross annual value. Can the Revenue add the rent because that is a house which goes with the job? This worried me when I first read the Clause. I wondered whether a man in that position would be caught by it. In the industrial belt of Scotland and in the North-East there are thousands of key workers in that position. The houses are not tied houses because they do not belong to the companies employing the workers.

They are not tied in the same way as 10, Downing Street, 11, Downing Street, or Chequers. Is the annual value of 10, Downing Street added to the Prime Ministers salary as an emolument? I do not know if that is so, but in this case there are public properties and the annual valuation cannot be fixed on normal principles because the houses are not free for letting. It is an annual value arrived at by discussion and agreement. Under the Scottish Rating and Valuation Act agreements are made in respect of domestic properties. This is done in the case of lighthouses. I remember a debate on this in Scottish Grand Committee, and debates on these things in that Committee are always very interesting. We had a long debate on Scottish lighthouses. What is the gross annual value of a residence attached to a lighthouse? It is not free to be let to anyone. Who would want to live in a lighthouse except a lighthouse keeper?

Many properties, although they do not belong to the employer, go with the job. I saw a man recently who had been provided with a house which did not belong to his employer but which had been provided for a worker coming into the job he held. What is the position of a man who is living in a house provided for him as a result of taking a job but not provided by his employer'? Sometimes he pays no rent; it is paid by his employer. Alternatively, if it is a local authority house the rent which he pays may be lower than the gross annual value of the house. Would the difference be added to his emoluments from his employers?

5.30 p.m.

Mr. McMaster

I am grateful to my hon. Friend for his help but I should like to raise with him a matter arising from the strictly legal definition which is always given to these words when they are interpreted in the courts. As has been said, judges are apt not to read our debates. I am concerned with the strict use of the word "occupier" in law. What happens if a person simply uses the premises but does not qualify as an occupier at law? Would it not be wise to look again at the Clause and if necessary to move an Amendment on Report to deal with the situation in which the person using the premises is not an occupier but is getting a benefit from the premises and therefore may be subject to tax?

Mr. Barber

May I reply first to my hon. Friend the Member for Belfast, East (Mr. McMaster)? The provisions of the Clause make no change whatever in the definition of an occupier, and I have not had brought to my attention any circumstances which would warrant any change. If my hon. Friend has any point in mind and he would like to contact me about it, I will look into it. But it was not the purpose, and it is not the effect, of the Clause to make any change in the definition of an occupier.

The hon. Member for Sowerby asked me, in particular, about the position of a police officer living in accommodation provided for him by the police force but not necessarily part of a police station. In normal circumstances, if the house were connected to a police station, I think that he would be a representative occupier. But if it is merely an ordinary dwelling which is provided for him by the police authority, the situation may be different.

For reasons which the hon. Member appreciates, it is difficult to be precise about particular cases without knowing the full circumstances. The word "occupier" to which this Clause refers does not include a person who lives in accommodation because he is required under the terms of his employment to live there for the proper performance of the duties of his employment. Those are the words which the hon. Member repeated. But the system would be wide open to avoidance if the obligations were not those which arose from the nature of the particular person's duties, and an arbitrary instruction by the employer is not in itself sufficient, I come back to what I said previously—that the Clause makes no change whatever in the principles which govern the question whether the person is an occupier proper or whether he is a so-called representative occupier.

Mr. Mitchison

Am I right in understanding that people who have lived in a house previously in conditions which did not make them liable to tax will remain not liable to tax?

Mr. Barber

Unless I have the precise circumstances given to me I am not sure exactly how it works out in every case which is covered by the anti-avoidance provisions in Sections 161 and 162 of the Income Tax Act, 1962. They deal, broadly speaking, with the position of directors and others with incomes over £2,000 a year, but in the normal case this will apply to the person who hitherto paid Schedule A on a house which was provided for him by his employer either rent free or an an economic rent. In future he will pay under Schedule E in accordance with the provisions of Schedule 7 of the Bill.

This is fair, because an employee who is provided with a house rent-free or at an uneconomic rent in reality has it as an emolument of his employment, and it is reasonable to tax it. Some employees are provided with a house rent free if one is available. Others, where a house is not available, receive additional salary in lieu of a provision of a house. It is surely right that they should receive broadly the same tax treatment.

Mr. Mitchison

In view of what my hon. Friend the Member for Sowerby (Mr. Houghton) said, I assure the hon. Member that there is no trap in my question. I recognise that this is a very difficult matter. But I understood him to say that no person who had occupied a house and had not been liable to pay tax on it before would become liable to pay tax on it by reason of the Clause. The instance which he gave about Schedule A conforms to that, because tax has been paid before in a different form. But if I am wrong in that assumption, I wish that the hon. Member would explain exactly what he means.

Mr. Barber

I know of no case in which a person who previously did not pay Schedule A would under this Clause pay tax under Schedule E, other than probably certain people who previously did not pay tax under Schedule A but were assessed to tax under Schedule E under the anti-avoidance provisions which were introduced to deal with directors and others with incomes over £2,000 a year. They previously paid tax under Schedule E. It is difficult to answer off the cuff, but I think that they will now be governed by this Clause, which is also concerned with Schedule E. That is why I could not answer the hon. and learned Gentleman precisely.

Mr. Callaghan

I am consultant to the Police Federation. What the hon. Member said could be contradictory. Policemen do not pay tax under Schedule A at the moment because they are required to live in houses provided by the police authority, but a number of those houses are not attached to police stations. They are nevertheless required to live there and can be transferred from one to another. I understood the hon. Member to say earlier that in those circumstances they might be assessed under Schedule E because the houses are not attached to police stations.

Mr. Barber

I am sorry if, with a desire to be as accurate as possible and not to mislead the Committee or those outside, I did not give the hon. Gentleman the right impression. It does not follow that, because a person does not live, as it were, on the site where he works or carries out his duties, he cannot be a representative occupier and thus be outside the ambit of the Clause. It is not sufficient for an employer merely to give an arbitrary instruction—a police authority to a police officer—that he must live in a particular house if living in it is not connected with his duties. He must have to live there for the proper performance of his duties. I understood the hon. Member for Cardiff, South-East (Mr. Callaghan) to say that in the past a police officer had been exempt from Schedule A, presumably on the ground that he was a representative occupier.

Mr. Callaghan

There is no intention to alter the present conditions of service of the police to the operation of the Clause?

Mr. Barber

I am sure that that will not be the case. I can certainly give that assurance to the hon. Member.

The hon. Member for Sowerby said that I had given the impression that this provision had been introduced as a consequence of the abolition of Schedule A and he thought that this was not the right impression for me to have given. There is a strong connection between the operation of Schedule A and the Clause. Had Schedule A not been abolished there would have been a at current prices, and the result would revaluation of all the properties involved, have been much the same as this charge under Schedule E. It is because there is to be no revaluation—because Schedule A has gone—that it has been necessary to make this provision.

My hon. Friend the Member for Crosby (Mr. Graham Page) and my hon. Friend the Member for Belfast, East raised a number of points. They both thought that I had made what was a clear statement of the law concerning occupiers proper and representative occupiers. My hon. Friend the Member for Crosby pointed out that the courts and Special Commissioners would not be able to read or take note of what I had said. I think that any efficient solicitor, like my hon. Friend, would draw attention to the case law on this point; and since my statement was based on that law the result, I hope, would be the same.

My hon. Friend the Member for Crosby asked from which date the provision would operate. The answer is from 6th April, for the year 1963–64 onwards. He also asked how the taxpayer would know what valuation was put on his property for the purposes of Clause 45. The answer, broadly speaking, is that he would find this out from the notice of assessment. I have not been able to ascertain the details of the provisions for appeal, but I can assure my hon. Friend that they exist and that they would be broadly analogous to the sort of rights which a person would have of appeal against a Schedule A valuation.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clauses 46 to 48 ordered to stand part of the Bill.