HC Deb 11 July 1949 vol 467 cc135-43
Mr. Assheton

I beg to move, in page 53, line 18, to leave out "used in connection with," and to insert: the use of which is dependent on. This Amendment deals with the case where the machinery or plant has a longer life than the life of the mineral deposit. The particular object which we seek to obtain by this Amendment is to permit processing plant to be given the same advantages as the plant which is actually used in the extraction of the mineral. It may well be that the processing plant may not have come to the end of its useful life at the time when the mineral deposit is exhausted. One may perhaps find, in the case of an oil refinery or similar business, that the oil may run out before the processing plant is also exhausted. There may be a very good case there for giving just the same treatment to the processing plant as is given in this Schedule to the machinery which is used for extracting the oil.

8.45 p.m.

The Solicitor-General

As the right hot) Gentleman has said, the effect of this Amendment would be to include plant such as processing plant. At the moment the provisions of paragraph 5 of Part I of the Sixth Schedule, which give a particular basis for assessing depreciation allowances in the case of plant and machinery used in connection with a mine or mineral source, relate only to machinery actually used for the mining operation, as part of the mining operation. The effect of the Amendment, which is to leave the words "used in connection with"—which are words of much narrower import, and which clearly describe only the plant and machinery which form part of the actual operation itself—and to substitute the words suggested, would result in the inclusion of all machinery which could be said to operate in any way in connection with the mine. In other words, it would include any processing plant which in the course of one particular period of time was operated for mine A, although when mine A comes to an end that processing plant would be equally available for the purpose of operation in mines B, C and D.

What is intended in paragraph 5 is simply to give this special basis of assessing depreciation allowances for the actual plant which forms part of the process of carrying on the mine, if I may so describe it. I do not think that we can very well go beyond that and include plant which may be available for half a dozen different mines, the useful existence of which is not in any sense dependent upon the operation of that plant. It may be a refining plant, or something of that sort, which may be situated in some populous area away from the mine. It may be perfectly possible, and very often will be the case, that that particular plant will be operated for the purpose of refining the produce of some other mine or mineral source when the first mineral source is exhausted. In other words, the Amendment would very greatly extend the scope of paragraph 5, and also of Section 16 (2) of the Income Tax Act, 1945, which paragraph 5 simply reproduces.

As the House knows, the object of the Sixth Schedule is really to reproduce in statutory form the existing practice which, in the case of mineral deposits, incorporates the provisions of Section 16 (2) of the Income Tax Act, 1945. Accordingly, when we were drafting the Sixth Schedule we had to reproduce the provisions of that subsection in the Schedule, and we do so in paragraph 5. We do not think that a case has been made out for extending very substantially the scope of paragraph 5 and also of Section 16 (2) of the 1945 Act, upon which this paragraph is based, with the result that a rather different situation might result. One does not know exactly what would be in and what would be out. Processing plant might even qualify for allowances in connection with its user for the purpose of even two or three mines in succession. For those general reasons, I must ask the House to reject this Amendment.

Amendment negatived.

The Solicitor-General

I beg to move, in page 54, line 46, at the end, to insert: and the Board shall consider the application. I think it would be convenient to the House if we also discussed the Amendment in page 54, line 47, to leave out from "that," to "may," in line 10, on page 55, and to insert: where the application is made under paragraph (c) of the said sub-paragraph (1), the Board may, if they think fit, require the applicant to satisfy them, as respects the machinery or plant to which the application relates, that in all the circumstances it is reasonable that an application should be made otherwise than under paragraph (a) or paragraph (b) of that sub-paragraph and, in that event, the Board shall consider the application only in so far as it relates to machinery or plant as respects which they are so satisfied. (3) On the consideration of an application under sub-paragraph (1) of this paragraph, either as respects all or as respects some only of the machinery or plant to which it relates, the Board of Referees. A trader who is dissatisfied with the allowance and fraction which have been assigned to him for the purpose of assessing his depreciation allowances has a right of appeal. He can go to the Commissioners, and if he is dissatisfied with the Commissioner's decision he has a further right of recourse to the Board of Referees. Generally speaking, when dealing with depreciation allowances in relation to plant and machinery, one is dealing with classes of machinery or substantial numbers of persons who use that machinery for a particular purpose. Depreciation allowances are assessed for a whole type of machinery or a whole group of people who operate a particular industry.

Sometimes a particular trader has a special reason for asking, in relation to his own plant and machinery, that a special fraction should be adopted for the purpose of assessing his depreciation allowance. As the Schedule is at present drafted, he cannot go to the Board of Referees if he is an individual, or, in other words, if he wants to go independently of any class of producers, unless he can satisfy the Commissioners that he has a good reason why he should go as an individual and not as part of some trade protection association, or some trade group which goes as a group to have the fraction or basis of assessment adjudicated upon by the Board of Referees.

Members opposite have put down an Amendment which would take away from the Commissioners power to say, in regard to an individual, that he should not go independently of his group unless the Commissioners said that it was a proper case in which he could so do. That Amendment has not been selected. It is the Amendment in page 54, line 47, to leave out from the beginning, to the end of line 5, in page 55. We have studied that Amendment and considered the argument which has no doubt motivated it, and we feel that we can go most of the way, but not the whole way.

What we have done is to say that an individual shall not be allowed to go to the Board of Referees and require them to determine his particular case unless the Board of Referees think, when he goes to them, that there is sufficient reason for him going independently. I ask the House to consider the kind of thing that happens. There is the disgruntled individual who thinks everyone's hand is against him and who wants to go in advance of the association to which he belongs. The association may be preparing a very full case, getting the relevant evidence and data together, to go to the Board of Referees, but a particular individual is disgruntled and insists on going independently, without any adequate reason, to have his case adjudicated upon in advance.

What we desire to do is to give the Board of Referees some means to protect themselves against an individual of that sort. We give them power to refuse to adjudicate on his appeal if they think there is no reason which justifies him going independently to them instead of as one of the class or group of traders to which he belongs. We think that is a necessary and an indispensable measure of protection to give to the Board of Referees, although we do agree that it is going too far in the other direction for the Commissioners to say whether or not he should go to them. We feel that we cannot go the whole way, because it would be putting the Board of Referees in an impossible position if they had to adjudicate independently and in advance on the claims of a single individual who wished to go on his own account.

Mr. Selwyn Lloyd

We on this side of the House are grateful to the Government for going some way to meet us, because I am certain that the right hon. and learned Gentleman would be the first to admit that the Sixth Schedule is exceedingly complicated and very difficult for the ordinary laymen to understand. It is therefore only right that we should pay very careful attention to the provisions relating to applications to the Commissioners or to the Board of Referees. The right hon. and learned Gentleman will agree with me that under the Schedule the matters which can be referred to the Commissioners or to the Board of Referees are whether an allowance has been correctly calculated or not. There are two methods whereby that can be calculated. One might be called the normal method, which has been slightly altered in that the Commissioners are no longer to have the same discretion as in the past, and the alternative method prescribed, which I think can commonly be called the straight line method.

It is a good thing that this new alternative method is provided, though it is a pity that it should be necessary to couch the whole business in so very complicated a Schedule. Just to illustrate the difficulty which a man might have in deciding whether to go to the Commissioners or to the Board of Referees, I am told that before he can decide his allowance under the first method he requires to have a considerable knowledge of algebra and also to have recourse to the logarithm tables. In fact, I am told that a formula to enable him to determine his allowance per cent. is five-fourths of one hundred minus X where X satisfies this formula:

XN= 10 (2N—1)

That is the formula which one has to work out before one can calculate the annual amount under the first method.

I shall be very careful not to embark on certain discussions which I should have liked to raise had certain Amendments of mine been called. It is directly on this point of appeals to the Commissioners that I urge the right hon. and learned Gentleman to make the widest possible circulation of tables such as those which I have sought to provide on the Order Paper. That will obviate the difficulties which I foresee if we proceed as provided under this paragraph. It seems to me that the ordinary business man should be able to tell at a glance from some table or other what his annual allowance is going to be without having to get a professional man to work it out. That is a point of substance which I press on the right hon. and learned Gentleman. In the technical matters relating to appeals, he has gone some way to meet us and we welcome what he has done.

Mr. Assheton

The House will have gathered from the speech of my hon. and learned Friend that this is a rather complicated affair. All I want to say is that I am grateful to the Solicitor-General for the Amendment which he has moved. We on this side of the House do not think it is as good an Amendment as we would have made. We recognise, however, that the Solicitor-General has gone some way to meet the difficulty, and all I can suggest is that we can only see how this proposal works out. If it works out satisfactorily, well and good, but if it does not, then next year we will put down the same Amendment again.

9.0 p.m.

Lieut.-Commander Braithwaite

The right hon. and learned Gentleman has advanced some way in our direction, but I put it to him that much will depend upon the interpretation and the operation of this Schedule. He made one remark which I thought slightly disturbing. He wanted to protect the Board of Referees from what I think he called disgruntled individuals. What they are likely to get is not so much individuals who are disgruntled as those who are not fully gruntled; in other words, those who have some small grievance. It is rather a dangerous criticism to lay down that the Referees can be approached only by some group of persons. There is about that an aroma, a faint aroma it may be, of the corporate State.

It is important to maintain in this country the right of individuals to make use of this machinery. If it be the case that such individuals might ask the Referees to arbitrate on insufficient evidence, or on a case which had not been fully prepared, the Referees can surely say that they are not in a position to arbitrate because of those facts. It would be a pity if it were to go out from this House as an instruction to the Referees that, because they are approached by an individual alone and without the assistance of another group, the individual must be debarred. I hope that that impression will be corrected.

The Solicitor-General

The individual can go to the Referees, but he may be required to satisfy them that it is reasonable in all the circumstances that he should not go with the others. The hon. and learned Member and his friends obviously went to very great trouble to work out an alternative system and to put it down on the Order Paper. I should like to say one or two words with regard to that Amendment, if I might, although it has not been called. We have considered very carefully that alternative system. There are difficulties which we think insuperable, in the way of its acceptance. The Schedule that we have adopted is certainly complicated, but it is only reproducing the existing practice. In point of fact, it has worked perfectly satisfactorily for many years.

Mr. Deputy-Speaker (Mr. Bowles)

The right hon. and learned Gentleman cannot discuss the proposed Amendment because Mr. Speaker did not select it.

The Solicitor-General

I beg your pardon, Mr. Deputy-Speaker. That is all I want to say.

Mr. Selwyn Lloyd

With regard to obviating recourse to this procedure, does the Solicitor-General think that it would be obviated if some tables were generally made available?

The Solicitor-General

I do not think so.

Amendment agreed to.

Further Amendment made: In page 54, line 47, leave out from "that," to "may," in line 10, on page 55, and insert: where the application is made under paragraph (c) of the said sub-paragraph (1), the Board may, if they think fit, require the applicant to satisfy them, as respects the machinery or plant to which the application relates, that in all the circumstances it is reasonable that an application should be made otherwise than under paragraph (a) or paragraph (b) of that sub-paragraph and, in that event, the Board shall consider the application only in so far as it relates to machinery or plant as respects which they are so satisfied. (3) On the consideration of an application under sub-paragraph (1) of this paragraph, either as respects all or as respects some only of the machinery or plant to which it relates, the Board of Referees."—[Sir S. Cripps.]

Mr. Stanley

I beg to move, in page 55, line 47, at the end, to insert: and if that person is aggrieved by the decision of the Commissioners on the amount of the capital expenditure so deemed to have been incurred he may appeal to the General or Special Commissioners. This is the part of the Schedule which deals with depreciation of hired machinery. We admit that the new subsection (2) is a concession which we welcome, but up till now, although the Treasury have maintained the principle that the depreciation allowance was open to people using hired machinery, the fact that the allowance was restricted to capital expenditure meant that men who were using hired machinery could rarely, if ever, get any benefit from the allowance. Under the new procedure they will be allowed to benefit because it will be the duty of the Commissioners to fix what they think is the share of the capital expenditure included in the hiring charges. It is, therefore, a benefit to the user of the machinery and one for which we thank the Government.

Our only point is this. At present the fixing of that share represented by capital expenditure is entirely at the discretion of the Commissioners. As far as I can see, no guidance is laid down for them in the Bill, and in those circumstances their decision becomes, to some extent an arbitrary one. We have no doubt that in the majority of cases the discretion will be used with the utmost care, but in view of the fact that that discretion is so wide, we suggest that this is a case where there should be some appeal in case the taxpayer feels aggrieved by an adverse decision. This Amendment provides such an opportunity.

Mr. Glenvil Hall

I hope that the House will reject this Amendment, or that the right hon. Gentleman will withdraw it after I have explained what is meant by Clause 9 (2). This Amendment is unnecessary because the Commissioners having jurisdiction in the matter are the appellate tribunal to which the right hon. Gentleman refers. As he said, the Inland Revenue or the Board of Referees will fix the percentage, and anyone aggrieved will have the right of appeal, as he desires them to have, to the General or Special Commissioners. The subsection permits that. We are, therefore, really at one, and I hope the right hon. Gentleman will withdraw his Amendment.

Mr. Stanley

In view of the fact, as I gather, that my Amendment is otiose and that we get what we want, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.