§ Mr. Nield
I beg to move, in page 22, line 35, after "only," to insert:or would in the opinion of the said Commissioners have been so treated if it had been formed before the year 1949–50.I suggest it would be for the convenience of the Committee to take this Amendment and the next three Amendments together; namely, in page 22, line 36, at end, insert:or such later date as the Commissioners of Inland Revenue may upon application allow";943 in line 40, after "April," insert:or such later date as aforesaid as the case may be";and in page 23, line 28, at end, add:(3) Notwithstanding that a body of persons has not been treated by the Commissioners of Inland Revenue as mentioned in paragraph (a) of subsection (1) of this section, the body of persons shall be deemed to have been so treated if on application to the Special Commissioners it proves to the satisfaction of the last-mentioned Commissioners that in relation to tax for any year of assessment before the year 1950–51 it was a body of persons established for charitable purposes only or would have been such a body but for the inclusion in its memorandum of association or other similar instrument regulating its functions of one or more of the provisions referred to in subsection (1) of this section.May I begin by seeking to assist the Committee by explaining what I conceive to be the purpose of Clause 29? In my view this Clause has been included in the Bill in order to meet a difficulty with which some voluntary charitable organisations have been confronted since the decision of the Court of Appeal in the case of the Oxford Group v. The Commissioners of Inland Revenue which was reported in 1949, 2 All England Reports, page 537, and was decided in July last year. Further I think it is intended to give effect to an undertaking which the right hon. and learned Gentleman the Chancellor of the Exchequer gave in December last year.
On 1st December the hon. Member for Salford, East (Mr Hardy), in a written question asked the Chancellor whether he had any statement to make in view of the fact that many corporate bodies which had hitherto been recognised by the Inland Revenue as charities and had limited themselves solely to charitable activities were then being told by the Inland Revenue that such recognition must be withdrawn because of the decision of the Court of Appeal in the case of the Oxford Group v. The Commissioners of Inland Revenue.
The Chancellor replied:Yes. I am aware of the difficulty that has arisen in the case of bodies, hitherto recognised as charities by the Inland Revenue, which include in the objects set out in their memorandum and articles powers to establish and support or aid in the establishment and support of charitable or benevolent associations and to subscribe or guarantee money for charitable or benevolent purposes or to do such things 944 as the organisation may think conducive to the attainments of its objects. In view of the fact that these powers, in cases such as those to which my hon. Friend refers, have in the past been regarded as merely ancillary to admittedly charitable objects and have accordingly not been called in question by the Inland Revenue, I propose that, subject to certain conditions, an opportunity should be afforded to such bodies to amend their constitution without being deprived of relief from Income Tax in respect of the intervening period.Then the Chancellor laid down the conditions, saying:The conditions are:(a) that the body concerned has hitherto been recognised by the Inland Revenue as a charity for Income Tax purposes,"—I ask the Committee to notice in particular that condition, namely, that in former times the particular charity had been so recognised—(b) that its status as such is impugned by reason only of the fact that its memorandum and articles include a paragraph or paragraphs in the terms to which I have referred or in terms closely approximating to those terms, and(c) that before the end of the current Income Tax year 1949–50 (ending 5th April, 1950), it amends its memorandum and articles to conform with the requirements of the law as now declared by the Court of Appeal.ask hon. Members again to pause there to notice that one of the requirements is that by a certain date, namely, April of this year, the memorandum must have been amended in order that relief may be obtained. Finally, the Chancellor said:Where these conditions are satisfied the Inland Revenue will allow relief in advance of legislative provision which I would propose to introduce in a Finance Bill in due course."—[OFFICIAL REPORT. 1st December, 1949; Vol. 470, c. 115–116.]There was the undertaking of the Chancellor given, in our view quite rightly, in answer to the Question put to him.
I ought further to explain exactly what happened briefly in the Oxford Group case. As hon. Members are aware, by Section 37 of the Income Tax Act, 1918, exemption from Income Tax is granted in respect of rents, and so on, forming part of the income of the body established for charitable purposes only, and another section in the Finance Act, 1921, grants similar facilities. The Oxford Group, which is a company limited by guarantee, applied for exemption under the Sections to which I have referred, claiming that they were formed for charitable purposes 945 only. The Court of Appeal upheld the court of first instance in saying that that company was not formed for charitable objects only and, therefore, was not entitled to exemption.
I think the position was that the Court of Appeal decided that the matter fell to be determined by construing the memorandum and articles of association of the company. I need not go into them in detail, but several of the objects and provisions of the articles were objected to. The Court of Appeal said that the company's objects were outside the purely charitable purposes where were, perhaps, their main object.
In the first three of the Amendments, what we seek to do is this. As the Committee will appreciate, under the Clause as it now stands the position is that if a body has been treated as a charity in any year prior to 1950–51, and if it duly amends its memorandum in order to comply with the decision in the case of the Oxford Group by a certain date, then no tax will be paid for past years on the ground that the body was not established for charitable purposes only.
There are two proposals for amending the Clause. The first is to be able to grant a similar relief, if I may so term it, to a charitable body formed in the year 1949–50, which, I think, would be excluded by the conditions which have been laid down. The second is to grant relief to those charities which have, by some omission or oversight, failed to amend their memorandum by the arbitrary date 6th April, 1950. The Committee will appreciate that in our legislative system we have very many times had experience of a Section which said that if a condition is not fulfilled owing to some quite innocent misapprehension or mistake, then there should be a discretion to overcome that mistake and to allow the amending to be done later by statutory provision
The object of the last Amendment is to say that where in years gone by a voluntary organisation had in error not applied for exemption and, therefore, the Commissioners had not granted this exemption, if now it appears that they would have granted the exemption in the exercise of this discretion, those bodies have to come forward to ask for that particular relief.
I hope that the Committee will forgive my taking some little time, but this is a 946 matter of considerable importance to a great number of voluntary organisations which are doing good work. Some of us have had the opportunity of advising and seeking to help some of these organisations in this respect. The Committee will readily appreciate that these organisations are extremely anxious to have charitable status so that they may obtain exemption from tax and the benefits of seven-year covenants and other devices for charitable purposes and so forth. I think that my right hon. and hon. Friends feel with me that the Clause in its purpose is wholly admirable but that there are omissions which could, and should, be made good. I hope that the Solicitor General will not think that we are asking merely for a little more—that is not so. Here are omissions which can, and should, be remedied in the interests of these organisations.
§ The Temporary Chairman
I think that the Committee would wish me to allow the discussion on the four Amendments to be taken together on the understanding that there will be no separate discussion on them later.
§ The Solicitor-General
The hon. and learned Member for the City of Chester (Mr. Nield) really has asked for three alternative concessions from the Government. After considering the four Amendments, we feel that we are in a position to go a certain way to meeting him, but we cannot go the whole way. The Clause is not designed—as, indeed the hon. and learned Member made perfectly clear when opening his case—to carry out a thorough overhaul of the legislation relating to the exemption of charities. It is designed merely to implement a strictly limited undertaking which was given by my right hon. and learned Friend the Chancellor of the Exchequer. In terms it does, of course, implement that undertaking. What is asked for, however, is that we should go further.
I feel very great difficulty in accepting the first Amendment. It proposes that in the case of charities which were formed in 1949–50 the same relief should be given under certain circumstances. It seems to me that the hon. and learned Member is asking us to go too far in asking for that. After all, those charities were formed after the Oxford Group case was decided. It was decided, I think, in the court of 947 first instance in January, 1949, and in the Court of Appeal in July, 1949. All charities which came into being during that year must, I would suggest, be taken to have come into being in the knowledge of the decision in the Oxford Group case.
Those who were framing the provisions of those charities must, or should, have had regard to what the Oxford Group case decided. It was a case which particularly affected charities, and anyone who was concerning himself with drafting the statutes or the memorandum and articles of any particular charity should, or certainly ought to, have taken into account the effect of the Oxford Group decision. I hope, therefore, that the Committee will agree that we ought not to accept the first of the four Amendments.
With regard to the second and third, the position is rather different. All that the hon. and learned Member is asking is that we should not adhere rigidly to the date of 6th April, 1950. This seems to me to be a reasonable request. The hon. and learned Member, asks that the Commissioners should on application have power to approve a later date as the date by which the alteration in the memorandum is to be effected. Therefore, I should be prepared to accept the Amendments to lines 36 and 40 on page 22. The effect of those Amendments would be to enable any charity which had not complied with the requirements of altering its memorandum by 6th April, 1950, to have an extended period on application to the Commissioners.
With regard to the fourth Amendment, I was listening to the argument of the hon. and learned Member to see what specific cases he gave. This Amendment relates to charitable bodies which were in existence before the Oxford Group case and for one reason or another, either because they did not ask for relief or for whatever other reason it might be, did not rank as charities and were not for taxation purposes given the exemption which applies to charitable bodies.
Having heard what the hon. and learned Member said, I should like to consider this matter between now and Report stage. In any case, I do not think that we could accept the Amendment as it stands, because it contains certain words which we would desire to alter, but I hope that the hon. and learned Member and 948 the Committee will agree that a reasonable approach to this matter would be, not to accept the first Amendment, but to accept the second and third, and that the hon. and learned Member should ask the permission of the Committee to withdraw the fourth Amendment upon the understanding that the Government will carefully consider its object in the hope—and indeed, I think I may say, in the expectation—that before the Report stage we may be able to put something down which would satisfy the object which the hon. and learned Member has in mind.
§ Mr. Manningham-Buller
I am sure that my hon. Friends will welcome the line that the right hon. and learned Gentleman has taken with these four Amendments, and it would be ungracious for me to seek to press him any further upon the fourth. I do not wish to do so, nor to press him with any undue severity regarding the first, but I should like him to give a little further consideration to the first, for this reason.
While it may be true that the people who formed these charities in 1949–50 ought to have been aware of the decision in the Oxford Group case and ought to have drafted their memoranda accordingly, instances may occur where that did not happen although it should have happened. It would be wrong in my view that what ought to be charities should be penalised on that account, and the first Amendment merely provides for an opportunity of putting right what ought to have been done ab initio having come to that decision. Control is still in the hands of the Commissioners, and I am at a loss to see what harm the acceptance of the first Amendment would really do. I do not think it could possibly result in bodies being included which were not really charities. I do not press the right hon. and learned Gentleman to give an answer now, but I ask that he will have a look at it again before the Report stage.
§ 7.30 p.m.
§ Mr. Bell
I wish to make two small points which I ask the right hon. and learned Gentleman to consider. The first is on the first Amendment by way of supplementation of what my hon. and learned Friend the Member for Northants, South (Mr. Manningham-Buller) said, namely, that the Oxford Group case was decided in the Court of Appeal in July, 1949, and 949 would be reported in "The Times," in that month and would be seen by many people, but so far as the law reports even the All England Reports, are concerned, it would not be reported until after the long vacation and, it would be a long time before many became aware of the final judgment.
On the fourth Amendment I ask the right hon. and learned Gentleman to bear one matter in consideration when looking into what he can do in regard to it. The effect of this Clause has been that the Commissioners were making wrong decisions for a considerable time on what charities were entitled to relief. We did not know they were making wrong decisions until the decision of the Court of Appeal on the Oxford Group case. It is possible, I do not know whether it has happened or not, that in some cases the Commissioners may have given a right decision and disallowed the charity. I cannot give specific cases, but it is possible that the Commissioners sitting in various places may have given a right decision in some cases. I say this in no feeling of disrespect of the Commissioners; but we know that in general they were giving a wrong decision. If there were any cases where a charity was barred out of relief by the fact that the Commissioners made a right decision, this fourth Amendment would cover the case.
§ Mr. Joynson-Hicks
I think the practical solution towards which the Solicitor-General has helped us in regard to the second and third Amendments will be exceedingly welcome. May I ask him to consider coupling that with some administrative action? The reason is a purely practical one, as practitioners have found. It is this; as we all know, many of these charitable bodies are not run by executives with a very great business experience. They also have a far different relationship with their inspector of taxes than the majority of commercial bodies. They rely entirely on their inspector of taxes and have the highest regard for his virtue and advice.
It has therefore occurred in a considerable number of cases to my personal knowledge, that the circulated letter of the inspector of taxes to many of these charities saying, quite properly and rightly, that for the time being he was not going to change his view of having hitherto considered them as charities, has been 950 accepted by these bodies as giving them official recognition as charities and that it has not been necessary to amend their memorandum or articles of association. Many charitable bodies have not taken the trouble to do so. Would it be possible for the right hon. and learned Gentleman to arrange administratively for a further communication to be addressed to these bodies, who have already received a communication from the inspector of taxes telling them in general terms that it is necessary for them to bring themselves into line in accordance with the undertaking given by the Chancellor of the Exchequer and the provisions of the Clause in the Bill?
§ The Solicitor-General
Certainly I will consider the administrative suggestion that is made. I am not aware of the circular letter but no doubt the matter will be looked into. I think the hon. and learned Member for the City of Chester (Mr. Nield) is pressing us to go a good deal beyond the undertaking of my right hon. and learned Friend. However, without giving any promise, certainly those who consider these matters will pay attention to his arguments, but I should not like to hold out any hope that we shall be able to go to the length to which he asks us to go.
With regard to the case of Commissioners giving what ultimately turns out to be a right decision with the result that the bodies were treated accordingly, certainly I should think that was the kind of case one had in mind in looking at the fourth Amendment and attention will be paid to what was said by the hon. Member for Buckinghamshire. South (Mr. Bell).
§ Mr. Nield
In view of what the right hon. and learned Gentleman has said, I beg to ask leave to withdraw the first Amendment, I am grateful to him for accepting the second and third Amendments, and I hope that by Report stage he will produce something satisfactory to us, having in mind that we there seek retrospective benefit, which I think is probably quite in order.
§ Amendment, by leave, withdrawn.
Amendments made: In page 22, line 36, at end, insert:
or such later date as the Commissioners of Inland Revenue may upon application allow.
In line 40, after "April," insert:
or such later date as aforesaid as the case may be."—[Mr. Nield.]
§ Clause, as amended, ordered to stand part of the Bill.
§ Clause 30 ordered to stand part of the Bill.