HC Deb 17 June 1936 vol 313 cc1084-8

In determining the principal value of an agricultural property for the purpose of Estate Duty deduction shall he made for any sums which during the 10 years preceding the death of the owner have been allowed to him for repayment of Income Tax in respect of the maintenance of the property as defined in the first schedule to the Income Tax Act, 1918.—[Mr. W. Roberts.]

Brought up, and read the First time.

7.35 p.m.


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

This new Clause is not intended to raise the large question of Death Duties as a whole, but is only intended to deal with a comparatively small issue. The effect of the Clause would not be to relieve landowners of taxation but rather to encourage them to spend money upon the maintenance of their agricultural property and thereby to benefit the occupier of land. The Committee will be aware that the valuation of land for the purposes of Estate Duty or Death Duty is based upon a value arrived at under Schedule A of the Income Tax Acts. Under the Income Tax Acts the rule, as originally laid down, provides that the value for Death Duty shall not be more than 25 times the Schedule A assessment and that a deduction of 5 per cent. may be made for maintenance. Under the Income Tax rules there is a much larger allowance made for maintenance. It is one-eighth, and, in addition, there is a further rule which provides that if a landowner spends more than the one-eighth, he may average the additional expenditure over five years and may make a claim in respect of it, provided that the expenditure has been for maintenance as defined in the rules governing Schedule A. For the purposes of this rule the term "maintenance" includes the replacement of farmhouses, farm buildings, cottages, fences, and other works where the replacement is necessary to maintain the existing rent.

Therefore, I wish to make it clear that, in this new Clause, I am not asking for any relaxation of taxation upon any new equipment, but only upon such expenditure on maintenance as is necessary to maintain the estate at the value at which it stands at present. The purpose of the Clause is to allow the cost of such maintenance to be deducted from the value of the property in the assessment for the purposes of Death Duty. The precise value of such allowances will be known because they will have formed the subject of a claim for the repayment of Income Tax annually. They will be precise amounts which it will be possible accurately to state. I hope that I have made the object of the new Clause clear to the Committee.

From the general point of view—and I am sure that this will meet with the approval of the Committee in general—it is of great importance, especially at the present time, that the equipment of agricultural land should not be allowed to fall into further disrepair. An immense amount of work needs to be done if employment on the land is to be maintained. The Clause would prove of great value to the workers and the farmers and to the community as a whole in maintaining food production in the country. It may be suggested that it would benefit primarily the landowner. I do not think so, because the attitude of too many landowners to-day is that, as agriculture is not profitable, it does not pay them to do anything to their farms. They do not get a return on their capital equal to that which is obtainable in industry. Because that general feeling is held by many landowners, by too many, the equipment of these farms is not kept up-to-date. An additional reason is that every landowner feels that if he is to pass on his estate intact in the face of heavy Death Duties he must provide investments out of which the Death Duties can be paid, and that there shall not be recourse to the selling of part of the land. The result is the derelict condition in which far too many agricultural districts find themselves to-day.

If the tenant farmer—and I have been one before now—can go to his landlord and ask him to do certain, works of repair, and can point out that not only will he get allowances in respect of Income Tax, but that when the time comes to pass on the land, it will be possible to obtain an allowance with regard to Estate Duty on such expenditure, I think that the tenant farmer will stand a very much better chance of getting that work done. What happens at the present time is that too often the landowner will say that he cannot afford to do the work. His tenant will therefore leave him, and he will have to find another tenant at a lower rent. In this way the value of land is reduced, and the Chancellor of the Exchequer himself loses when the land is valued for Death Duties, as the value for Death Duty is thereby reduced. If the value of the land is maintained through necessary work being carried out, the value of the Death Duty will be maintained.

If the Clause were accepted it would be to the benefit of the agricultural community as a whole. Anybody connected with agriculture knows of the enormous amount of work that requires to be done. I do not think that any industry other than that of agriculture would be ready to carry on with buildings and equipment which might be 100 or 200 years old, or in the dilapidated condition in which so many farmhouses and farm buildings are at the present day. We hear a good deal about bringing the Defence Forces up to date and it is suggested that it is very wrong not to equip the armed forces of this country with the latest equipment. I suggest also that it is very foolish to expect agriculture, if a crisis should arise, to produce the additional foodstuffs which would be required, if the equipment is entirely out of date. The purpose of the new Clause is to give an additional encouragement to landowners to spend money in maintaining their farms with modern equipment, and I hope that for that reason the Chancellor of the Exchequer will give it his favourable consideration.

7.45 p.m.


I hope the Chan- cellor of the Exchequer will not accede to the request that has been made by the hon. Member. In all his arguments there is one weak spot. He suggested that the landowner does not keep his farm buildings in full and good repair because he is not able to do so. Why? I presume it is because he is not able to get sufficient rent. Why is he not able to get sufficient rent? We have heard from the benches opposite that the reason is because the farmer is not able to get an adequate price for the commodity he produces. If the landowner is going to get the full rent on which Schedule A assessment will be based it will be necessary for the Minister of Agriculture in the first place to do something for the farmer. Schedule A assessments are revised periodically. I do not now whether it is the case in the country as it is in the towns, where they are revised every five years. These assessments are based on the rental that is likely to be produced from the land. Therefore, if the rents are low, whether due to the dilapidated state of the farm buildings or not, presumably the Schedule A assessment will also be low. If the Schedule A assessment bears any real relation to the rental value of the land, then I presume that in the case of the death of the owner of the land the Schedule A assessment being low and being multiplied by this factor, whatever it is, the actual value on which the Estate Duty will be based will also be low. Therefore, it will not be necessary for the additional allowance suggested by the hon. Member to be made.

7.47 p.m.


This Clause is another variant of the devices put forward time after time to give further relief to the owners of agricultural land. Whatever the merits of a general argument of that kind may be, I cannot this year, when increased taxation is being imposed, possibly consider any Amendment of the kind. I would remind the Committee that agricultural land has already received relief from Estate Duties to the amount of £600,000 a year. Apart from the general consideration, this particular form of Clause is open to serious objection. There is a point of principle involved, inasmuch as the relief here is dependent on the amount of money that the owner spends in maintaining the value of his property. If I were to accept this Clause I do not see why it should be confined to agriculture. The hon. Member in moving the Clause stated that one of its purposes was to provide that the equipment of land, buildings and so forth should not be allowed to fall into decay. May I point out that in the case where the owner does not spend any money in the maintenance of his property, because he cannot afford to do so, this Clause would give no relief? The amount of relief that would be given by the Clause would vary according to the value of the land, and the less need there was for relief the more would be the relief given by the Clause. That being so, the hon. Member will see that the particular form of relief that he desires to give to agriculture is not one that I could accept.

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