§
There shall be added to Rule 3 (c) of the Rules applicable to Cases I and II of Schedule D, a second proviso, as follows:
Provided also that where any such part is so used, sums may be deducted in respect of rates, and in respect of heating, lighting, cleaning and similar outlay in so far as those sums allowed have not been granted as a deduction in ascertaining the net annual value of the dwelling-house for the purposes of the assessment under Schedule A in respect of that house."—[Mr. G. P. Stevens.]
§ Brought up and read the First time.
134§ Mr. G. P. Stevens (Portsmouth, Langstone)I beg to move, "That the Clause be read a Second time."
Rule 3 of the Rules applicable to Cases I and II of Schedule D, the Schedule under which professional profits and incomes are normally taxed, of the Income Tax Act, 1918, defines very largely by exclusion the profits or income against which is applied the appropriate rate of Income Tax. Rule 3 (c) expressly excludes the rent or annual value of any dwelling-house but it adds a proviso that where a part of that dwelling-house is used for professional purposes some part of the rent or the net annual value, not in any case exceeding two-thirds, shall be charged against the profits or income of the taxpayer.
Many people use their private houses or some part of them as business premises. Doctors use their living rooms as surgeries or waiting rooms. Those are rooms. which at other times are used as part of their normal dwelling-house. Barristers take home briefs and study them at weekends and in the evenings, and even accountants have been known to take home balance sheets and to produce reports, although whether they were on Festival Gardens or some more cheery item depended on the circumstances.
It is not only the rent or the net annual value which is involved; there is also heating, lighting and some proportion of rates and things of that kind. It is unfortunate that the Report of the Committee on the Taxation of Trading Profits, presided over by Mr. Millard Tucker, which was set up by Sir Stafford Cripps, was not in the hands of the Chancellor in time for him to incorporate any of its recommendations in his Budget. It may be a question of time in that instance but it is certainly a matter of fact that none of the Tucker recommendations was included in the Budget.
As a matter of practice, inspectors of taxes have interpreted Rule 3 (c) in a generous and broadminded spirit and have for a considerable time allowed some deduction for rates, lighting, heating and so on in respect of rooms so used, but it is a pity and a mistake that a general practice should not have the support of a Statute. The Clause merely puts on a statutory basis that which is already the general practice, and as that is so I have every hope that the Chancellor will accept it.
§ Mr. GaitskellIt may again be for the convenience of the Committee if I intervene at an early stage. As the hon. Member for Langstone (Mr. Stevens) has pointed out, the Clause embodies one of the recommendations of the Tucker Committee and it really amounts to bringing under the statute what is already the practice of the Inland Revenue. That being so, we see no particular difficulty about the principle involved, though I am advised that the wording of the Clause is defective in certain respects.
That brings me to a rather more general point. As the hon. Member said, during my Budget statement I indicated that I had not had time to study the Tucker Committee's Report and recommendations in detail. The Report had only been published a few days before the Budget speech.
§ 8.30 p.m.
§ Mr. Selwyn Lloyd (Wirral)But the Report is dated 20th February.
§ Mr. GaitskellThe Report was completed in February but it was not published until April. Although in theory I could have got hold of it in manuscript form, I was preoccupied with a number of other things at that time. Nor would it have been possible for anybody else to have seen it. I was going on to say that it would be quite out of the question in highly technical matters of this kind, of considerable importance to industry and commerce, for the Government to reach its conclusions without having fairly full consultations with the representatives of industry. Therefore, I said during my Budget speech that we must have these consultations and await the reactions of industry before reaching our final conclusions, so that it would not be possible for us this year to introduce legislation to implement the report of the Tucker Committee.
What I am saying at the moment applies not only to this Clause but also to the four or five or six other new Clauses based on recommendations of the Tucker Committee. Perhaps I could add, with your permission, Major Milner, that we are by no means unsympathetic to those other new Clauses. Indeed our first reaction to the recommendations which they embody is in the main favourable. That applies particularly not only to this Clause, but also to the one relating 136 to the set-off of business losses against other income of the following year, and to the one immediately following dealing with the carry-back of losses on cessation.
I cannot, therefore, agree to bring changes into this Bill. We cannot pick and choose in this way, and I should not be prepared to do that until I had had consultations with industry. Nevertheless, I can say to the hon. Member that in respect of this Clause and the principles involved in most of the others based on the Tucker Report, it will simply be a question of time. Provided that consultations with industry yield no disagreement and that we all feel it is the right thing to do, it should be possible to introduce appropriate legislation next year.
§ Mr. Selwyn LloydI am not sure that this is the proper time, or that it is the intention of the Chancellor or yourself, Major Milner, to have a lengthy and general debate on the Report of the Millard Tucker Committee. I do not think it would be the wish of the Committee that we should do that. Nevertheless, we cannot altogether permit the words of the Chancellor to go without comment.
I admit at once that the right hon. Gentleman has not made an unconciliatory speech with regard to this new Clause. and personally I should be quite happy if he would intimate that he would not rule out the question of retrospection as regards its benefits. The Government are willing to be retrospective when there is any benefit to the Inland Revenue. I should have thought that in this case they could be retrospective in regard to the interests of the taxpayer because, so far as this Clause is concerned, there need be no discussion with industry.
It is not a matter into which industry comes to any extent. It is a matter of general practice, of which I confess I was not aware, to my own personal disadvantage. I do not know whether the Attorney-General was aware of it. Before he came in there was a reference to people reading briefs at home late at night, consuming electricity and coal, and the extent to which they could get an allowance for that. Possibly if that could be made retrospective for a number of years, some of us could get considerable advantage. That would be unreasonable to ask. All that we could possibly ask 137 him to do is to take into account the present year.
On the general matter, we have not had a very good deal so far as the Millard Tucker Report is concerned. Before the Clause was moved, I refreshed my memory with what Sir Stafford Cripps said in April, 1949, when he announced that he was setting up that Committee. He began by saying that his reason for setting it up was that he had received representations from many quarters about the difficulty which industrial companies were experiencing in financing the cost of replacement of old machinery, and so forth. Then he announced that he was introducing the initial allowances as a means of taking care of that for the interim period. It is quite fair, of course, to remind the present Chancellor of the Exchequer that he has abolished initial allowances.
Sir Stafford Cripps then went on to deal with the general question of calculating profits. He referred to the representations made to him by the F.B.I. Speaking of the initial allowances, he said:
The proposal I have just described will, I hope, go far to meet the immediate needs of industry. But there is a number of other issues arising out of the present structure of taxation … which I think, requires further examination.He went on to say:An inquiry covering the whole subject would be a very extensive undertaking indeed, and I propose, therefore, to make a start by taking the technical issues which arise in connection with the computation of taxable profits.He thought thatit would be convenient if, as a first step, these technical matters were examined by a small independent committee, whose terms of reference, in effect, would he to inquire into the method of computing trade profits.Sir Stafford Cripps then said:I propose therefore to set up such a committee accordingly. It will not be part of this committee's functions to inquire into the general question of the incidence of tax upon industry, but its work will clear the ground for the comprehensive inquiry which, as I have indicated, I hope to set on foot at a later stage. The inquiry of the committee which I am now proposing to set up will necessarily take some time, and its results will not be available for consideration in connection with this year's Finance Bill."—[OFFICIAL REPORT, 6th April, 1949; Vol. 463, c. 2098.]That was on 6th April, 1949.138 I do not think that anybody who welcomed that statement of Sir Stafford Cripps thought that the results of that Committee would not be available for consideration in connection with the Finance Bill of 1950 or, apparently, in connection with the Bill of 1951. What the Chancellor really has asked us to do is to wipe out of our minds or of our discussions on the Bill any of the recommendations of the Millard Tucker Committee. I do not think anybody who welcomed Sir Stafford Cripps' announce-met in 1949 realised that it meant a moratorium on these matters until 1952, which is what I understand from the right hon. Gentleman is really the position.
I cannot admit that that is satisfactory. The Report was signed, apparently, on 20th February, 1951. It would be interesting to know when it was that the Government decided to incorporate Clause 32 in the Bill, and I somehow feel that had there been the same desire for expedition in the matter of these reforms—they are admittedly overdue—as there was with regard to Clause 32, somehow or other the right hon. Gentleman would have contrived to get them within the terms of the present Bill.
However, the Chancellor tonight has made certain conciliatory statements. I welcome those. I hope that the right hon. Gentleman will not be in office—not he personally, but rather the Government—in order to put them into operation, but if by any misfortune to the nation he should still be in the same position when the next Finance Bill comes forward, I hope he will honour the obligations that he has indicated tonight.
§ Lieut.-Commander BraithwaiteThe Committee would be wise to pin its hopes to the preamble of the right hon. Gentleman's recent utterance, which, in the language of the Book of Common Prayer, might be described as "comforting words." If we listened carefully to what he said, we realise that he has this matter at heart and will hand it over to his successor at an early date so that his pledge that the matter will be dealt with next year will he fulfilled.
There was one deduction I drew from his remarks which I hope he will be able to confirm. We have often complained in the past that Ministerial assurances 139 are not written into a Bill and I think the Chancellor gave us a valid reason for delaying the matter, but may we take it that his speech will be carefully studied by his inspectorate, who will act from now onwards in the terms of that speech in dealing with such claims by persons affected by the intentions of the Clause? The Chancellor told us that all the Clause did was to give statutory effect to a practice already operating and, if that is so, the Chancellor's words can be taken as confirmation and I think we might take some comfort while awaiting the events of 1952.
§ Mr. MaudlingI am naurally disappointed that at this stage the Chancellor is not prepared to take action on these points, which seem straightforward. I am particularly interested in a later Clause which I cannot discuss now, because a constituent is particularly and very unfortunately affected by the present law and I was hoping to be able to put his case forward this evening; but apparently, because his case has been supported by a distinguished Committee it will not be possible for the Chancellor to consider it.
Surely there would be a disadvantage in regard to a number of these amendments to the tax. Would it not be better to incorporate them in a separate Income Bill? There seems to be much advantage in the idea of separating alterations in tax law of this kind from the main Finance Bill of the year and putting them into a Bill of their own. I should like the right hon. Gentleman before the next Finance Bill to consider a separate Bill of this kind.
Mr. LytteitonI think we have to examine the practical issues which the Chancellor's short speech raised. Certain new Clauses have been selected but, as I understood it, the Chancellor was giving us a preview of what he was going to say about them "I am going to do nothing until 1952." I regard that statement with some apprehension because, as my hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) has shown, it was a little much to ask us to hold our hands on these very necessary reforms for about three years, which is what we are being asked to do. I do not know that I could go quite as far as he wishes.
140 The trouble is that in this case the Treasury do not appear to have an opinion of their own about something about reforms which are long overdue, but they have to wait for the report of a particular committee—and I do not impute any particular blame to them—before they put right these things which are a mischief to the taxpayers. The Millard Tucker Report is presented at a time when the Chancellor is entitled to say it is impossible for him to put those reforms into the present statute. I would like him to go a little further than he has done and, although some hon. Friends may not move these individual new Clauses, I think that the task of the Chancellor will be too easy.
We all know that one of the forms of protective colouring that the Government animal assumes is to set up a Royal Commission and inform the chairman that he has to go into the subject very thoroughly. We all know what that means. The Chancellor says, "These are very complicated matters and I will set up a legal body and, when it reports, I will look at it." When it reports, unfortunately, it turns out that the report is presented about 10 days before he has to produce his Budget, and it is not good enough to accept that with complacency. I think he should go a little further. Perhaps the lines on which he can assure the Committee are those suggested by my hon. Friend the Member for Barnet (Mr. Maudling).
8.45 p.m.
If there is a hope of some of these reforms being introduced in the interim between now and the next Finance Bill I should pass from these Clauses with less apprehension. I might add that the idea that some of them require consultation with industry is ill-sustained. There are some Clauses, as hon. Members can see by reading them, which require no consultation with industry. They are concerned with relations between the Inland Revenue and the individual taxpayer.
If the right hon. Gentleman intends to ask us to hold our hands over these Clauses now he must first tell us whether he excludes the possibility of these reforms being effected before the next Finance Bill, and whether in particular he will say that in more precise terms about cases in which industry has not to be consulted, 141 where the Clauses have the Chancellor's sympathy. At present the sympathy is, like butter, a little too thinly spread over the bread, and I have a sneaking idea that there will be some rather stale bits of crusts left for the taxpayer if we leave the matter where it is.
I am apprehensive about the matter because I think it makes the task of Chancellors who do not want to introduce difficult reforms too easy if they are to be waiting for reports of committees which by some strange coincidence always report to the Chancellor just too late for him to incorporate the necessary reforms in his Budget. I do not know which of these Clauses will be selected by you, Major Milner but unless we can get from the Chancellor something more than we have heard one or two of these new Clauses which you call will have to be moved and discussed. I am trying to help the Committee as much as I can.
§ Mr. GaitskellThe right hon. Gentleman has asked me a number of questions. He will not of course expect me to give indications of whether advance legislation is possible. I cannot tonight express an opinion on a matter like that. I must say that these changes might after all have been made many years before now. They have not been made. We are in favour of at least some of them in principle. I repeat the assurance which I gave that we shall certainly see that they come into next year's Finance Bill. Whether it will be possible in any special case to do anything better than that I cannot say tonight.
I had hoped that my intervention would on the one hand have enabled the Committee to proceed a little faster—we have still a lot to get through—and at the same time; give Members opposite some assurance about our general intention towards the Clauses which they have put down. It is for you, Major Milner, to say how we shall conduct our proceedings, but I hope that what I have said will help to shorten the discussion on these particular matters.
§ Mr. Selwyn LloydWe are all naturally anxious to discuss as many of these matters as possible in as short a time as possible. It seems to me that the next new Clause which really deals with the recommendations of the Millard Tucker Committee is that at the bottom 142 of page 1406, in the name of my hon. Friend the Member for Barnet (Mr. Maudling), my hon. Friend the Member for Portsmouth, Langstone (Mr. G. P. Stevens), and myself:
Appeals in connection with claims under s. 34 of Income Tax Act, 1918.The right hon. Gentleman has made a considered statement on the new Clause that we are discusing. If he would make a similar sort of conciliatory gesture with regard to the subsequent new Clause to which I have referred I think it would be unnecessary to take up the time of the Committee in discussing it. It follows the recommendations of the Millard Tucker Committee, and I am certain that if the right hon. Gentleman can now do as I suggest it will not be necessary for us to discuss that new Clause even if you, Major Milner, select it.
§ Mr. GaitskellWe see no objection in principle to what is involved in it.
§ Mr. StevensI cannot refuse to respond to the appeal for speed from the Chancellor, even though his example has not been a conspicuous one. Therefore, I beg to ask leave to withdraw the Motion.
§ Motion and Clause, by leave, withdrawn.
§ The ChairmanI take it, having regard to the assurance that the Chancellor has given, that it is not proposed to move the "Millard Tucker" Clauses mentioned by the hon. and learned Member for Wirral (Mr. Selwyn Lloyd)?
§ Mr. LytteltonIf it was possible to follow the line which the Chancellor has followed with regard to the Clause which has been withdrawn we shall make very good progress. I attach importance to getting specific assurances that the principles of these Clauses are not distasteful to the Chancellor, rather than to rely on the overall good will which he tries to permeate. I should like a rather more pointed description. If we could proceed by asking whether the Clause in the name of my hon. Friend the Member for Langstone (Mr. Stevens) relating to the set off of business losses against other income of the following year, is in general agreeable in principle to him, then it might not be necessary for my hon. Friend to move it and so take up the 143 time of the Committee. But I should like to know whether there is anything on each of the Clauses which is likely to prevent the right hon. Gentleman from putting them into force.
§ Mr. StevensI should like to know whether or not it is the intention to discuss any further Millard Tucker recommendations?
§ The ChairmanI take it that, having regard to the assurance given by the Chancellor, the hon. Member for Barnet (Mr. Maudling) does not propose to move his new Clause relating to appeals in connection with claims under Section 34 of the Income Tax Act, 1918. The question arises now with regard to the Clause in the name of the hon. Member for Langstone (Mr. Stevens) regarding the set off of business losses against other income of the following year.
§ Mr. LytteltonYou have said on that Clause, Major Milner, that you took it that it was the wish of the Committee that no more of the Millard Tucker Clauses should be moved. To that I have demurred. We could not possibly go so far as that. We should have to move them one by one. But if we could get a similar assurance from the Chancellor about the individual Clauses, I think it possible that some of my hon. Friends may not wish to move them; but we must go Clause by Clause.
§ The ChairmanThe right hon. Gentleman would probably agree that the Clause may be moved formally.