HC Deb 21 June 1948 vol 452 cc1054-61

Where under the provisions of Part III of the Transport Act, 1947, an undertaking or part thereof has been transferred to the British Transport Commission and the person from whom the undertaking was transferred carries on any other trade or sets up or commences any new trade or any vocation, he shall be entitled to claim that in computing income tax payable in respect of any such other trade, new trade or vocation any relief, deduction or allowance which could have been allowed if he had continued to carry on the transferred undertaking shall be allowed to him.—[Mr. P. Roberts.]

Brought up, and read the First time.

Mr. P. Roberts

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

We had a preliminary discussion on this topic on the Committee stage, and it is fair to say that the Solicitor-General and Members of the Government at that time did not appreciate fully the force of the argument put from this side of the Committee. We hope that this new Clause will give them an opportunity to reconsider what was said then, and to accept it. As the Bill stands, where a road haulier who was carrying on business before the vesting date and had other business which he was carrying on also, when the Commission take over his trucks or wagons he is paid for them a capital sum. If that capital sum is greater than the written off value as allowed under wear and tear allowances, then that extra amount of money is taken back by the Treasury and is to be charged to Income Tax.

The first point we want to make quite clear is that this is a case where the Government have stepped in and have forced a compulsory transfer of the assets. In other words, if this man could continue to carry on, no doubt these wagons or lorries would have gone on running for a number of years and, at the end of the time, they would have been written off completely by wear and tear allowances and there would have been no Income Tax payable at the end. If he elected to sell those wagons or lorries to some other contractor, and, so to speak, cashed in on his capital, then of course he has to face this extra Income Tax liability, but that is an election which he will take voluntarily. The point is here that the Government have come in and forced this compulsory sale upon him.

I said I thought there was some misunderstanding before. On this point I would like to refer to what the learned Solicitor-General said when arguing this question on the Committee stage of the Finance Bill. In trying to argue that this was an ordinary normal transaction, he said: In the case where compensation is paid for the particular asset which is taken over, a balancing charge remains, as a matter of logical necessity, to be paid by the enterprise whose asset is bought out; in other words, it is an ordinary sale.''—[OFFICIAL REPORT. 2nd June,1948 Vol. 451, c. 1166.] This is not an ordinary sale. If it were we should not be pressing this new Clause. This is an extraordinary sale, a compulsory sale. The Treasury are stepping in to take this extra amount of Income Tax because of the passing of the Transport Act and for no other reason. We think it unfair that a man compulsorily bought out should have to pay tax which otherwise he would not have to pay.

In Section 18 of the Income Tax Act, 1945, the principle is clearly set out that even if a trader sells his assets and receives more for them than the written down value, he is not liable to Income Tax on the surplus if he re-invests that money in other assets. He can carry on trading. That is a perfectly reasonable principle which we suggest should be brought in here, so that where a man who has been told to stop his business he should be able to re-invest the money he gets back in other business and thereby elude the tax.

The argument might be put that he is going into an entirely different kind of business, but that is not his fault as he has been compulsorily stopped from continuing his business. Although the Government want people to produce more, such a man may be prevented from doing so because half his capital will be taken away and he cannot re-invest it in the normal way. This will have a bad effect on enterprising hauliers and others deprived under the Transport Act from carrying on business and from entering other businesses. I do not think it is the intention of the Government that those people should be stopped from entering other businesses.

The proposed new Clause says: carries on any other trade or sets up or commences any new trade or any vocation, I appreciate that that is a very wide provision and I hope that if the Government do not like those words they will be prepared to offer some other words, so long as the principle is accepted, so that a man carrying on some other business may reinvest his capital in that business. The Treasury will not lose in the long run, because they will get the wear and tear allowance as the years go by, and if in the end there is a surplus that will be subject to tax in the normal way. In the Committee stage it was suggested from this side that the Treasury were getting something which otherwise they would not get. In reply the Solicitor-General did not appreciate the argument and he said: The Treasury does not gain."—[OFFICIAL REPORT, 2nd June, 1948; Vol. 451, C. 1162.] Of course the Treasury gains, and must gain. If the Act nationalising transport had not been passed the Treasury would not get anything from this, but the assets would have continued in the hands of these people and the allowances would be written off. Now, because of that Act, the Treasury scoop in the money en passant so to speak. I hope the Government will consider the principle behind this proposed new Clause.

8.45 p.m.

Mr. Eccles

I beg to second the Motion.

This is by no means a new idea. When the 1945 Income Tax Act was going through the House some of us back benchers, who at that time sat on the benches opposite, warned my right hon. Friend the Member for Scottish Universities (Sir J. Anderson), who was then Chancellor of the Exchequer, that this would very likely occur. We have brought this before the House on more than one occasion since then, and now we have an actual example of how a compulsory sale would cause hardship to a certain class of people who have to cease engaging in a business in which they were engaged. We only put this forward because of the compulsion element. This particular charge will be payable, not in the ordinary course of business, but owing to an Act of Parliament which has nationalised certain sections of industry. In justice I feel that this Clause should be accepted. I stress that this is not something of which we have suddenly thought, but something we foresaw in 1945.

The Paymaster-General (Mr. Marquand)

It is true that under the present law a trader may carry losses forward to set off against profits from the same business for six years, but if he carries on two businesses and wishes to set off losses incurred in one business against profits of the other he may do it for one year only. There is no provision for carrying forward losses on another business for any later years than the current Income Tax year, or the year of assessment. There are good reasons for this. The one year set off for several businesses carried on by the same person is justified on the grounds that the Income Tax falls on his income for the year, and in fixing the amount of the aggregate tax it is reasonable that losses should be set off against profits. The six years may be justified by the argument that losses should be made good out of profits and six years is fixed because after a time profit and loss shades off into capital account.

The fact that termination of the business comes about by nationalisation does not seem to afford any good ground for departing from the one year rule. It is only in one year that the trader can set off losses on business A against profits on business B. Although I have listened with care to what the hon. Members for Ecclesall (Mr. P. Roberts) and Chippenham (Mr. Eccles) have had to say, they have not convinced me that the mere fact of nationalisation should make us introduce a new rule as to the way these things are decided. Therefore, I fear that I cannot accept the new Clause.

Lieut.-Commander Braithwaite

I hope that that is not all that the Government have to say about this Clause. The Paymaster-General has not addressed himself to the main, and I think, lucid argument put forward by my hon. Friend the Member for Ecclesall (Mr. P. Roberts) and endorsed by my hon. Friend the Member for Chippenham (Mr. Eccles). The point is very simple. It is that here for the first time is the man whose business is compulsorily wound up through no volition of his own; it is brought about by a Statute of this House. Does not that create an entirely new set of circumstances?

The Paymaster-General said he did not feel that nationalisation was a reason for changing the existing one-year rule, but does not nationalisation introduce an entirely new set of circumstances? The six years arrangement, as the Paymaster-General has explained, deals with a series of years, etc. Here we are considering the case of a man who, following the passing of the Transport Act, 1947, finds himself taken over on 1st January, 1948, or probably at a later date if he is a road haulier. He might be taken over at a date which falls just on one side or the other of the financial year, which begins in April. We are entitled to rather more explanation why the Government feel that they cannot meet my hon. Friend in this entirely new set of circumstances.

Mr. P. Roberts

With the leave of the House, I would like to put a question. Have I understood the Paymaster-General aright in thinking that he said that as the law is at present these people can, in fact, carry over their balancing charge for one year in any event, that a surplus may be used for writing off maintenance charges for one year on the other business if such a person has invested in another business? Perhaps I have not made myself clear. I will try again. If such persons have put the money they have received from the Transport Commission into their other business, will they be allowed to write off

maintenance charges on that other business for one year? I rather understood that to be what the Minister said. I do not take that to be the position. The Paymaster-General says that in the same business one can write off allowances for six years, but if one changes one's business that can only be done for one year. Does that one year provision apply to a haulier who is taken over and who reinvests the money in another business?

Mr. Marquand

When he was carrying on two businesses at the same time he might set off a loss in one against a profit made in another for the current Income Tax period. That does not mean that after nationalisation such a person can then proceed to set off against some business which he subsequently carries on losses incurred in the business which he was carrying on and which is now defunct so far as he is concerned.

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

The House divided: Ayes, 87; Noes, 236.

Division No. 233.] AYES. [8.53 p.m.
Agnew, Cmdr. P. G. Hollis, M. C. Ponsonby, Col. C. E.
Bennett, Sir P. Holmes, Sir J. Stanley (Harwich) Poole, O. B. S. (Oswestry)
Boles, Lt.-Col. D. C. (Wells) Howard, Hon. A. Price-White, Lt.-Col. D.
Bowen, R. Jeffreys, General Sir G. Rayner, Brig. R.
Bower, N. Kendall, W. D. Roberts, P. G. (Ecclesall)
Boyd-Carpenter, J. A. Kerr, Sir J. Graham Ropner, Col. L.
Braithwaite, Lt.-Comdr J. G. Langford-Holt, J. Ross, Sir R. D. (Londonderry)
Buchan-Hepburn, P. G. T. Legge-Bourke, Maj. E. A. H. Savory, Prof. D. L.
Challen, C. Lipson, D. L. Shepherd, W. S. (Bucklow)
Channon, H. Lloyd, Selwyn (Wirral) Smith, E. P. (Ashford)
Clarke, Col. R. S. Low, A. R. W. Smithers, Sir W.
Conant, Maj. R. J. E. Lucas-Tooth, Sir H. Spearman, A. C. M.
Crookshank, Capt. Rt. Hon. H. F. C. McCorquodale, Rt. Hon. M. S. Stanley, Rt. Hon. O.
Cuthbert, W. N. Macdonald, Sir P. (I. of Wight) Strauss, H. G. (English Universities)
Digby, S. W. Maclay, Hon. J. S. Studholme, H. G.
Dodds-Parker, A. D. Macpherson, N. (Dumfries) Sutcliffe, H.
Drayson, G. B. Maitland, Comdr. J. W. Taylor, C. S. (Eastbourne)
Drewe, C. Marshall, D. (Bodmin) Thornton-Kemsley, C. N.
Duncan, Rt. Hn. Sir A. (City of Lond) Medlicott, Brigadier F. Turton, R. H.
Duthie, W. S. Mellor, Sir J. Vane, W. M. F.
Eccles, D. M. Molson, A. H. E. Wakefield, Sir W. W.
Fletcher, W. (Bury) Morris, Hopkin (Carmarthen) Walker-Smith, D.
Fraser, H. C. P. (Stone) Morrison, Rt. Hon. W. S. (Cirencester) Ward, Hon. G. R.
Fraser, Sir I. (Lonsdale) Nicholson, G. Watt, Sir G. S. Harvie
Glyn, Sir R. Noble, Comdr. A. H. P. Wheatley, Colonel M. J. (Dorset, E.)
Grimston, R. V. O'Neill, Rt. Hon. Sir H. White, J. B. (Canterbury)
Hannon, Sir P. (Moseley) Orr-Ewing, I. L. Young, Sir A. S. L. (Partick)
Headlam, Lieut.-Col. Rt. Hon. Sir C. Peto, Brig. C. H. M.
Hinchingbrooke, Viscount Pickthorn, K. TELLERS FOR THE AYES:
Hogg, Hon. Q. Pitman, I. J. Major Ramsay.
and Brigadier Mackeson.
NOES.
Adams, Richard (Balham) Baird, J. Blackburn, A. R.
Adams, W. T. (Hammersmith, South) Balfour, A. Blenkinsop, A.
Allen, A. C. (Bosworth) Barstow, P. G. Blyton, W. R.
Alpass, J. H. Barton, C. Bowles, F. G. (Nuneaton)
Attewell, H. C. Battley, J. R. Braddock, Mrs. E. M. (L'pl, Exch'ge)
Austin, H. Lewis Bechervaise, A. E. Brooks, T. J. (Rothwell)
Ayles, W. H. Bellenger, Rt. Hon. F. J. Brown, George (Belper)
Ayrton Gould, Mrs. B. Benson, G. Brown, T. J. (Ince)
Bacon, Miss A. Berry, H. Bruce, Maj. D. W. T.
Buchanan, Rt. Hon. G. Hughes, Emrys (S. Ayr) Ridealgh, Mrs. M.
Butler, H. W. (Hackney, S.) Hughes, Hector (Aberdeen, N.) Robens, A.
Byers, Frank Hughes, H. D. (W'lverh'pton, W.) Roberts, Emrys (Merioneth)
Callaghan, James Hynd, H. (Hackney, C.) Roberts, Goronwy (Caernarvonshire)
Castle, Mrs. B. A. Hynd, J. B. (Attercliffe) Rogers, G. H. R.
Champion, A. J. Irvine, A. J. (Liverpool, Edge Hill) Ross, William (Kilmarnock)
Chater, D. Irving, W. J. (Tottenham, N.) Royle, C.
Chetwynd, G. R. Jay, D. P. T. Scott-Elliot, W.
Cobb, F. A. Jeger, G. (Winchester) Segal, Dr. S.
Cocks, F. S. Jones, D. T. (Hartlepool) Shackleton, E. A. A.
Coldrick, W. Jones, P. Asterley (Hitchin) Sharp, Granville
Collindridge, F. Keenan, W. Shawcross, C. N. (Widnes)
Collins, V. J. Key, C. W. Shawcross, Rt. Hn. Sir H. (St. Helene)
Colman, Miss G. M. Kinley, J. Shurmer, P.
Cooper, Wing-Comdr. G. Kirby, B. V. Silverman, J. (Erdington)
Corbet, Mrs. F. K. (Camb'well, N. W.) Lang, G. Simmons, C. J.
Cove, W. G. Lawson, Rt. Hon. J. J. Skeffington, A. M.
Cripps, Rt. Hon. Sir S. Lee, F. (Hulme) Skeffington-Lodge, T. C.
Daggar, G. Leslie, J. R. Skinnard, F. W.
Daines, P. Lewis, J. (Bolton) Smith, C. (Colchester)
Davies, Rt. Hn. Clement (Montgomery) Lindgren, G. S. Smith, Ellis (Stoke)
Davies, Harold (Leek) Lipton, Lt.-Col. M. Sorensen, R. W.
Davies, Haydn (St. Pancras, S.W.) Longden, F. Soskice, Sir Frank
Davies, R. J. (Westhoughton) Lyne, A. W. Sparks, J. A.
Deer, G. McEntee, V. La T. Steele, T.
Delargy, H. J. McGhee, H. G. Stross, Dr. B.
Diamond, J. McGovern, J. Stubbs, A. E.
Dobbie, W. Mack, J. D. Sylvester, G. O.
Dodds, N. N. McKay, J. (Wallsend) Symonds, A. L.
Donovan, T. McLeavy, F. Taylor, R. J. (Morpeth)
Driberg, T. E. N. Macpherson, T. (Romford) Thomas, D. E. (Aberdare)
Dumpleton, C. W. Mallalieu, J. P. W. (Huddersfield) Thomas, George (Cardiff)
Dye, S. Mann, Mrs. J. Thomas, I. O. (Wrekin)
Ede, Rt. Hon. J. C. Manning, C. (Camberwell, N.) Thurtle, Ernest
Edwards, N. (Caerphilly) Marquand, H. A. Tolley, L.
Edwards, W. J. (Whitechapel) Mathers, Rt. Hon. George Turner-Samuels, M.
Evans, E. (Lowestoft) Mellish, R. J. Ungoed-Thomas, L.
Evans, S. N. (Wednesbury) Messer, F. Viant, S. P.
Ewart, R. Middleton, Mrs. L. Wadsworth, G.
Farthing, W. J. Mikardo, Ian Walkden, E.
Fernyhough, E. Mitchison, G. R. Walker, G. H.
Fletcher, E. G. M. (Islington, E.) Moody, A. S. Warbey, W. N.
Follick, M. Morgan, Dr. H. B. Watkins, T. E.
Foot, M. M. Morley, R. Weitzman, D.
Fraser, T. (Hamilton) Moyle, A. Wells, P. L. (Faversham)
Freeman, J. (Watford) Murray, J. D. Wells, W. T. (Walsall)
Ganley, Mrs. C. S. Nally, W. West, D. G.
Gibbins, J. Neal, H. (Claycross) Wheatley, Rt. Hn. J. T. (Edinb'gh, E.)
Gibson, C. W. Nichol, Mrs. M. E. (Bradford, N.) White, C. F. (Derbyshire, W.)
Glanville, J. E. (Consett) Noel-Baker, Rt. Hon. P. J. (Derby) Whiteley, Rt. Hon. W.
Grenfell, D. R. Noel-Buxton, Lady Wigg, George
Grey, C. F. O'Brien, T. Wilkins, W. A.
Griffiths, W. D. (Moss Side) Oldfield, W. H. Willey, F. T. (Sunderland)
Guest, Dr. L. Haden Oliver, G. H. Williams, J. L. (Kelvingrove)
Gunter, R. J. Palmer, A. M. F. Williams, R. W. (Wigan)
Guy, W. H. Parkin, B. T. Williams, Rt. Hon. T. (Don Valley)
Haire, John E. (Wycombe) Paton, Mrs. F. (Rushcliffe) Williams, W. R. (Heston)
Hale, Leslie Pearson, A. Wilmot, Rt. Hon. J.
Hall, Rt. Hon. Glenvil Peart, T. F. Woodburn, Rt. Hon. A.
Hamilton, Lieut.-Col. R. Platts-Mills, J. F. P. Woods, G. S.
Hannan, W. (Maryhill) Popplewell, E. Wyatt, W.
Hardy, E. A. Porter, E. (Warrington) Willis, E.
Harrison, J. Porter, G. (Leeds) Wills, Mrs. E. A.
Haworth, J. Price, M. Philips Yates, V. F.
Henderson, Joseph (Ardwick) Proctor, W. T. Young, Sir R. (Newton)
Herbison, Miss M. Pursey, Cmdr. H. Younger, Hon. Kenneth
Holman, P. Randall, H. E. Zilliacus, K.
Holmes, H. E. (Hemsworth) Ranger, J.
Horabin, T. L. Rees-Williams, D. R. TELLERS FOR THE NOES:
House, G. Reeves, J. Mr. Snow and
Hoy, J. Reid, T. (Swindon) Mr. George Wallace.