HC Deb 30 September 1909 vol 11 cc1548-52

An agreement for the sale of goods, wares, or merchandise in pursuance of which sums are to be paid at stated periods as the price thereof, or as fixed or minimum charges in respect thereof, shall not be deemed to be a bond, covenant, or instrument of any kind whatsoever within the meaning of the Stamp Act, 1891.

I hope this will receive favourable consideration. It is of great importance in the case of water, gas, and electricity. It is essential in most cases that an agreement for the supply of these commodities should provide for the payment of definite sums. Unless this Clause was introduced all such agreements under a recent decision will be liable for payments ad valorem. This Clause was brought up before the Electric Lighting Acts (Amendment) Committee, when the Parliamentary Secretary to the Board of Trade was understood to say, that while he approved of the principle of the Clause, he could not put it into the Electric Lighting Bill, and he suggested that it should be brought in under the Bill we are now discussing. An agreement for sale of any goods, ware, or merchandise is exempt from payment of Stamp Duty. It seems, however, from a recent decision, that if, under agreement, the price of the goods is paid by instalments, the document changes its character, and comes under the heading of a "bond or covenant" upon which Stamp Duty is payable at the rate of 2s. 6d. per cent. If you order a telephone or the electric light under ordinary conditions you have no Stamp Duty to pay; but if owing to the fact that the telephone has to be taken any distance, the company say that you must pay the charge at stated intervals, you immediately become liable to Stamp Duty. There is no doubt whatever that that was not intended. In the case of the County of Durham Electrical Power Distribution Company v. Inland Revenue Commissioners, Mr. Justice Channell said:— In this case I have been extremely anxious to accede to Counsel's argument, if I could possibly do so, because I have a strong impression that such a document as this was not one which the Legislature had in contemplation when they enacted the Clause in the schedule under discussion. I cannot help thinking that it was put in for the purpose of taxing instruments of a totally different character. … My decision will have a very curious consequence, for it will involve the conclusion that in the case of every contract in writing for the sale of goods which by the terms of the contract are to be paid for, not in one lump sum, but in instalments at future stated times, the instrument is chargeable with an ad valorem duty upon the price. The Parliamentary Secretary to the Board of Trade having suggested that the Clause should be brought up here and Mr. Justice Channell having explained that it was quite an error that Stamp Duty should be charged upon these particular payments by instalments, I think I am justified in asking the Secretary to the Treasury to accept the Clause which I now move. I think it is a matter of considerable importance, and hope the right hon. Gentleman will accept the Clause, or, at any rate, promise that he will give some favourable consideration to it. If he does not accept the conditions, I hope he will accept the principle, and give relief to those who ask for it. I beg to move.


My right hon. Friend has asked me to deal with this matter, because the Clause seeks to amend the legal decision of Justice Channell, which was confirmed unanimously by the Court of Appeal in a case in which I appeared for the Crown. It is because of the decision in that case that the hon. Gentleman has been asked by friends to bring forward this new Clause. First of all, there is some misapprehension as to what the decision really was. The law was that agreements for the sale of goods, wares, or merchandise are entirely free from Stamp Duty. That will still be the law. But there is in the Stamp Act a provision that a bond, or a security which is a primary security for the payment of money at stated periods, and over a definite period, has to pay an ad valorem Stamp Duty of 2s. 6d. per £100. The decision of Justice Channell was given in a case of some peculiarity. It was assumed—a rather peculiar assumption—for the purpose of the case that the supply of electrical energy was goods, wares, or merchandise. There was a further agreement on the part of the buyers to pay so much per unit whatever quantity was supplied, and to pay for a certain number of years, whether the minimum quantity was taken or not. The decision—I think a perfectly right decision—was that that was a security for the payment of the money at stated periods for a definite period. All the three judges, certainly the leading judge of the Court, said they had no apprehensions at all like those which had been entertained by Justice Channell as to the far-reaching effect of his decision. The matter now really remains where I think it ought to remain—namely, that if the agreement is clearly an agreement for the sale of goods, wares, or merchandise, there is to be no Stamp Duty at all. But if it is a bond, covenant, or security, such as was the subject of the decision, I think it is quite reasonable that the law should be made what, according to the decision, it is—namely, that a Stamp Duty of 2s. 6d. per £100 should be paid. I have one further observation to make: that the decision of Justice Channell was supported unanimously by three Lord Justices of the Court of Appeal; and there was no appeal to the House of Lords. The law has been so determined. We desire it should so remain. Therefore we have, I am sorry to say, to oppose the new Clause of the hon. Gentleman, which seeks to overturn the law.


This is a much more important matter than Members of the House probably realise. If I understand the Amendment, it is to remedy a case like this: Suppose I buy 10,000 or 20,000 tons of coal to be paid for one-third in cash, one-third in two months, and one-third in three months, I am liable for ad valorem Stamp Duty on the amount of the contract; and, again, I am liable if I buy 10,000 tons of coal and take them in monthly quantities to be paid for by cash each month. That has not hitherto been the case. But undoubtedly under this decision of Justice Channell's there is at present a general uneasiness. The commercial classes at present are in great doubt upon that subject, and I should like, if the Solicitor-General would say whether, in the cases I put to him, ad valorem duty would have to be paid.


In the case put by the hon. Member of the sale of 10,000 tons of coal to be paid for in a first instalment at the end of one month, a second instalment at the end of the second month, and a third at the end of the third month, the decision has never gone so far as to say that that contract should be stamped as an ad valorem contract, that is, a contract merely of goods, wares, and merchandise. The second case put was where a man buys 10,000 tons of coal, taking 3,000 one month, 3,000 the next month, 3,000 the third month, and 1,000 the fourth month; that again has been regarded simply and solely as a contract for the sale of goods, wares, and merchandise, and is exempt from Stamp Duty. But if the purchaser of coal said I will pay so much per month for the first month, so much for the second month, and so much for the third month, whatever the quantity of coal, I take it that would be regarded as temporary security. It is no longer a mere sale and purchase, it is a contract where one man pledges himself to pay, and the other has got security for a certain sum of money whether he supplies the coal or not.


The result of this decision is that every agreement made for the supply of telephones, electricity, or gas, whereby there is an expenditure on carrying the supply to the house of the persons who wishes to have the supply, will be regarded as a contract, and will be subject to the duty. The person to whose house the telephone, gas, or electricity had to be carried if he lived a distance away, would have to enter into an agreement for five instalments of £5 each, whereas, if he lived in a town he would have his telephone for £9, and in addition he would have to pay the Stamp Duty. That is a very serious difference. They will be compelled to pay an annual payment for five years in order to get the supply that renders them liable to Stamp Duty. The Stamp Duty in future will apply to such an enormous number of cases that this is really an occasion urgently requiring the careful consideration of the Treasury, because this proposal does apply most unequally in cases of gas, telephones, and electricity, and those instances to which I have referred. This is undoubtedly a large matter, and there is a vast difference between these cases. If you happen to pay for your supply £9 10s. you pay no Stamp Duty at all.


May I point out to the hon. Member that the cases he has mentioned will have to be decided on the facts of each case. I have been asked by the hon. Gentleman to declare that the three judges who decided the case referred to in the Court of Appeal were wrong and that Mr. Justice Channell was right. It would almost be lèse majesté on my part to make a declaration of that kind.


Perhaps the Committee will allow me to thank the hon. and learned Gentleman for the way he has answered the points I put to him. The Solicitor-General is always courteous in his replies. We have now got on this point a very valuable counsel's opinion without paying for it.

Question, "That the Clause be read a second time," put, and negatived.

Bill reported; as amended to be considered to-morrow (Friday).

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