HC Deb 21 June 1921 vol 143 cc1262-7

The relief granted to charities under Section thirty-seven, Sub-section (1), paragraph (a) of The Income Tax Act, 1918, shall be deemed also to apply to any lands or property owned and occupied by the charities to which that section applies.—[Mr. G. Locker-Lampson.]

Brought up, and read the First time.


I beg to move "That the Clause be read a Second time."

I should be very glad indeed if my right hon. Friend could accept this small Amendment, which is intended to remove a very old anomaly. Charities are exempted from income tax on rents which they receive from land and houses, but they are not exempted from income tax on the land they actually occupy themselves. Take a charity that has a hall in London for the entertainment of the very poor. They have to pay tax on that. But next door they have a coffee tavern, which they let to a firm of caterers, and get a rent for it. They do not pay the tax on that rent. That really is an extraordinary anomaly. The Royal Commission recommended that this anomaly should be done away with. The reference is page 68, paragraph 308. They recommended that the two things should be put on the same footing.


The point which my hon. Friend has put before the Committee is one, I think, with which they will naturally have a good deal of sympathy, but he has forgotten that the Royal Commission, in making its recommendation, qualified it by saying that something might be done on this point if and when the definition of "charity" had been made more precise and was no longer left in the large terms under which it at present lies in the Act of 1918, as construed by judicial decisions. Charities at the present time come under four main heads. They embrace any institution carried on for the relief of poverty, for the advancement of education, for the advancement of religion, and for "other purposes beneficial to the community." All these are charities. The Royal Commission said that until a more precise and limited definition of charity were arrived at, it would be impossible to give the relief suggested, and a good many other forms of relief which were suggested by the Commission. The difficulty of accepting the Clause now—quite apart from the structure, with which I will not trouble my hon. Friend, though I think he has got the wrong portion of the Act of 1918—would be that in all cases where premises belong to what is called a charity, that is, an institution carried on for purposes beneficial to the public, this exemption would apply and a very large amount of revenue would be lost. The Clause opens such a very wide door that it is impossible to accept it.


The learned Solicitor-General somewhat misread the finding of the Royal Commission. I quite agree that there should be a further definition of the word "charity," but if he looks at Section 308 he will find there that the Commission expressly state that, assuming there was no alteration in the definition of charity, after a reasonable time it was desirable that this alteration should be made. Certainly that reasonable time has elapsed, and the Government has taken no steps towards defining the word "charity." Can you imagine a more reasonable alteration? If a charity own land, and they let it, they are exempt from income tax, and if they occupy it they are liable to the tax. That was a decision in a case which occurred in what is called the Essex Hall in Essex Street, a case which was held for certain scientific purposes and so forth. It was clearly a mistake in the Act, and the Judges'—'the Solicitor-General knows the case quite as well as I do—comments were in the strongest possible terms, and they had to pronounce on the mistake that was put in the Act of Parliament.


Perhaps the hon. and learned Gentleman will give the exact terms. He has forgotten the sentence when the term charity has been re-defined or alternatively within some reasonable time, premises owned and occupied by a charity. He must not overlook the words when the term charity has been redefined.


Or a reasonable time. I said that. A reasonable time has elapsed, and the Government has not brought or attempted to bring in any fresh definition of a charity or alternatively within some reasonable time. Therefore I was perfectly right in saying what I did. I am absolutely right in saying that the Royal Commission have recommended that this absurd anomaly should be altered. It is a ridiculous position that a charity which kept or owned lands has to pay Income Tax upon them, but a charity which lets them are exempt from that altogether. There was a case given on the Second Reading of the Bill by a legal Member who instanced very strongly the case of a lifeboat institution which owned different sheds or shelters for their lifeboats around the shores of England. They have to pay Income Tax upon them, but if they owned land, as they probably do, and get rent from it, they are exempt from Income Tax. Nothing can be more ridiculous than that. I did press the Government and the Chancellor of the Exchequer on this point on the Second Reading. It has been characterised in the strongest possible terms by judges, and we have the recommendation of the Royal Commission. It does not involve much loss to the Exchequer and it does an inestimable amount of harm to bodies which are very much affected by it like such bodies as the London Playing Fields. They supply playing grounds in London and these are practically being taxed out of existence at the present time. What is the effect if you tax them out of existence? You come down to a municipal scheme for providing playgrounds for London; either the London County Council will provide them or the Government will subsidise them. They are now kept and well managed by private enterprise. They are used for playing football, cricket and other games and at the present time they are absolutely taxed out of existence because they have to pay income tax upon the lands they occupy. I do appeal most strongly to the Chancellor of the Exchequer not to put forward the legal point but to hold out some hope that this matter will be considered between now and the Report stage. It is a crying evil and a ridiculous anomaly.


I cannot imagine that the Government is going to leave this matter without some reply after the speech of my hon. and learned Friend opposite. It seems to me that he has made out a strong case. If a Division is taken I shall have to go into the Lobby with him.


When the Solicitor-General replied after I moved this new Clause he said that it was structurally inaccurate—I forget the exact words he used—and that I quoted the

wrong part of the original Act, and I do not quite know what he means. I have the original Act of 1918 in my hand, and Section 37, Sub-section (1), paragraph (a), says: The Charities are exempted from the tax under Schedule A in respect of the land and profits of land. I simply seek in this new Clause that the relief granted under that should be extended to charities that are actually in occupation.


Rents and profits only apply to the premises which are let. Accordingly, the Clause which is sought to be inserted is entirely inapposite for the purposes of my hon. Friend and my hon. and learned Friend on the Back Bench. I have been very much impressed with the taxation of charities ever since I gave any attention to it, but at the present moment the matter is one of very great difficulty. If you do bring in concessions with a large and generous hand, the effect undoubtedly would be to make exemptions to a very large number of organisations which, in effect, are not charities at all. It has been a matter of very considerable difficulty to find a definition of charities which would give relief to the people who, indeed, deserve it. I am willing to give the Committee this assurance. I do not profess to be able to clear up the whole matter between now and the Report stage, but between now and the next Finance Bill I shall devote my attention to have the whole matter investigated not merely with regard to the kind of charity to which the Mover of this Clause has referred, but to the playing fields case which has certainly moved my conscience. That was why I did not hasten to get up and reply as I cannot give an assurance that the matter can be successfully cleared up between now and the Report stage. But I do give the Committee the assurance that the whole matter shall be cleared up before the next Finance Bill comes into law.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 34; Noes, 121.

Division No. 186.] AYES. [12.40 a.m.
Acland, Rt. Hon. Francis D. Butcher, Sir John George Gould, James C.
Armitage, Robert Conway, Sir W. Martin Gretton, Colonel John
Barnes, Major H. (Newcastle, E.) Cowan, D. M. (Scottish Universities) Hamilton, Major C. G. C.
Barton, Sir William (Oldham) Entwistle, Major C. F. Henderson, Major V. L. (Tradeston)
Benn, Captain Wedgwood (Leith) Fildes, Henry Holmes, J. Stanley
Hopkins, John W. W. Mallalieu, Frederick William Shaw, Hon. Alex. (Kilmarnock)
Horne, Edgar (Surrey, Guildford) Morgan, Major D. Watts Thomson, T. (Middlesbrough, West)
Johnstone, Joseph Newbould, Alfred Ernest Wedgwood, Colonel Josiah C.
Jones, Henry Haydn (Merioneth) Ormsby-Gore, Hon. William
Joynson-Hicks, Sir William Raffan, Peter Wilson TELLERS FOR THE AYES.—
Lane-Fox, G. R. Remnant, Sir James Mr. Godfrey Locker-Lampson and
McNeill, Ronald (Kent, Canterbury) Rendall, Athelstan Mr. Rawlinson.
MacVeagh, Jeremiah Seddon, J. A.
Agg-Gardner, Sir James Tynte Ford, Patrick Johnston Pickering, Colonel Emil W.
Amery, Leopold C. M. S. Forestier-Walker, L. Pollock, Sir Ernest Murray
Bagley, Captain E. Ashton Foxcroft, Captain Charles Talbot Pownall, Lieut.-Colonel Assheton
Baldwin, Rt. Hon. Stanley Fraser, Major Sir Keith Purchase, H. G.
Balfour, George (Hampstead) Fremantle, Lieut.-Colonel Francis E. Raper, A. Baldwin
Barlow, Sir Montague Gange, E. Stanley Richardson, Alexander (Gravesend)
Barnett, Major Richard W. Ganzoni, Sir John Roberts, Samuel (Hereford, Hereford)
Barnston, Major Harry Gee, Captain Robert Robinson, S (Brecon and Radnor)
Bell, Lieut.-Col. W. C. H. (Devizes) Gibbs, Colonel George Abraham Samuel, Samuel (W'dsworth, Putney)
Bellairs, Commander Carlyon W. Gilmour, Lieut.-Colonel Sir John Sanders, Colonel Sir Robert Arthur
Benn, Capt. Sir I. H., Bart. (Gr'nw'h) Glanville, Harold James Sassoon, Sir Philip Albert Gustave D.
Betterton, Henry B. Green, Joseph F. (Leicester, W.) Scott, Leslie (Liverpool, Exchange)
Birchall, Major J. Dearman Greene, Lt.-Col. Sir W. (Hack'y, N.) Shaw, Capt. William T. (Forfar)
Boscawen, Rt. Hon. Sir A. Griffith- Hacking, Captain Douglas H. Smith, Sir Malcolm (Orkney)
Bowyer, Captain G. W. E. Hailwood, Augustine Sprot, Colonel Sir Alexander
Boyd-Carpenter, Major A. Hamilton, Major C. G. C. Stanier, Captain Sir Beville
Bridgeman, Rt. Hon. William Clive Hannon, Patrick Joseph Henry Stanley, Major Hon. G. (Preston)
Briggs, Harold Harmsworth, C. B. (Bedford, Luton) Stephenson, Lieut.-Colonel H. K.
Brittain, Sir Harry Henry, Denis S. (Londonderry, S.) Sugden, W. H.
Brown, Major D. C. Hope, Lt.-Col. Sir J. A. (Midlothian) Sutherland, Sir William
Bruton, Sir James Horne, Sir R. S. (Glasgow, Hillhead) Thomson, F. C. (Aberdeen, South)
Buckley, Lieut.-Colonel A. Hotchkin, Captain Stafford Vere Thomson, Sir W. Mitchell- (Maryhill)
Butcher, Sir John George Hunter, General Sir A. (Lancaster) Tryon, Major George Clement
Carr, W. Theodore Jameson, John Gordon Turton, Edmund Russborough
Cautley, Henry Strother Kellaway, Rt. Hon. Fredk. George Walters, Rt. Hon. Sir John Tudor
Chamberlain, Rt. Hn. J. A. (Birm. W.) Kidd, James Ward, William Dudley (Southampton)
Chamberlain, N. (Birm., Ladywood) King, Captain Henry Douglas Watson, Captain John Bertrand
Clay, Lieut.-Colonel H. H. Spender Law, Alfred J. (Rochdale) Weston, Colonel John Wakefield
Colvin, Brig.-General Richard Beale Lindsay, William Arthur Wheler, Col. Granville C. H.
Coote, Colin Reith (Isle of Ely) Lloyd-Greame, Sir P. White, Col. G. D. (Southport)
Cope, Major William Locker-Lampson, Com. O. (H'tingd'n) Williams, C. (Tavistock)
Davidson, J. C. C. (Hemel Hempstead) Lyle, C. E. Leonard Wills, Lt.-Col. Sir Gilbert Alan H.
Davidson, Major-General Sir J. H. M'Lean, Lieut.-Col. Charles W. W. Wood, Hon. Edward F. L. (Ripon)
Davies, Alfred Thomas (Lincoln) Manville, Edward Worthington-Evans, Rt. Hon. Sir L.
Davies, Thomas (Cirencester) Moore, Major-General Sir Newton J. Young, E. H. (Norwich)
Doyle, N. Grattan Moore-Brabazon, Lieut.-Col. J. T. C. Young, Sir Frederick W. (Swindon)
Elliot, Capt. Walter E. (Lanark) Morrison, Hugh Younger, Sir George
Evans, Ernest Neal, Arthur
Eyres-Monsell, Com. Bolton M. Newman, Sir R. H. S. D. L. (Exeter) TELLERS FOR THE NOES.—
Falcon, Captain Michael Nicholson, Reginald (Doncaster) Colonel Leslie Wilson and Mr.
Falle, Major Sir Bertram Godfray Parker, James McCurdy.
Fildes, Henry Parry, Lieut.-Colonel Thomas Henry