(1) in this section—
war damage" and "developed hereditament" have the meanings assigned to those expressions respectively by section five of the War Damage Act, 1943;
the body corporate" means any body corporate (including any unincorporated society or other body falling within the scope of section fifty-six of this Act) whose functions consist wholly or mainly in the holding managing and developing of property comprising developed hereditaments and which by reason and in respect of such functions is chargeable with the excess profits levy; and
the damaged hereditament" means any developed hereditament that has sustained war damage in respect of which a payment of cost of works or a value payment has been paid or is payable to the body corporate under Part I of the War Damage Act, 1943.
§ (2) In any case where during the whole or any part of the standard period no net income was capable of being derived from the damaged hereditament owing to its being unfit for occupation by reason of war damage or the net income which was capable of being derived from such hereditament was less than the net income which it would reasonably have been expected to yield in the absence of war damage the standard profit of the body corporate shall 1310 be calculated upon the assumption that during the whole or the said part (as the case may be) of the standard period the net income of the body corporate from the damaged hereditament was the amount of net income which that hereditament would reasonably have been expected to yield in the absence of war damage:
§ Provided that if a value payment was made during the standard period in respect of the war damage the amount of any interest accruing on or earned by such value payment so far as it is attributable to the whole or the said part (as the case may be) of the standard period, shall for the purpose of the calculation of the standard profit of the body corporate be deducted from such amount of net income reasonably expected to have been yielded.
§ (3) For the purpose of the calculation of the standard profit of the body corporate or the amount payable by the body corporate by way of excess profits levy in respect of any chargeable accounting period in any case where the amount paid or payable to the body corporate in respect of war damage to the damaged hereditament is a value payment interest on the value payment at the rate specified in subsection (5) of section ten of the War Damage Act, 1943, shall be deemed to have accrued from year to year over the period from the time of the occurrence of the war damage to the time of payment of the amount of the value payment and to have been payable by yearly payments from the time of the occurrence of the war damage.—[Sir J. Mellor.]
§ Brought up, and read the First time.
§ Sir John Mellor (Sutton Coldfield)
I beg to move, "That the Clause be read a Second time."
This is a matter of great importance to property companies, and I must disclose a private interest in that connection; but it also raises a matter of considerable principle. I think it is possible that the Committee may take the view that the Clause is drawn too narrowly, and that its provisions ought not to be confined to what are known as property companies, but ought to apply to companies in general. If that should be the view of the Committee, I should say that it is one that could be implemented on Report stage.
The matter arises like this. There were many blitzed properties which, owing to the difficulty in obtaining licences, were not rebuilt or repaired in time for occupation before the standard period; but some of those properties were or will be rebuilt or repaired and either are or will be in occupation before a chargeable accounting period. The Committee will see that in those cases the Excess Profits Levy will be charged, under the Bill as it stands now, upon the whole of the net 1311 income of those properties. I hardly think the Committee would agree that that is just or is desirable.
The Clause proposes—I quote a few selected words—that…the standard profit of the body corporate shall be calculated upon the assumption that … the net income of the body corporate from the damaged hereditament was the amount of net income which that hereditament would reasonably have been expected to yield in the absence of war damage.In other words, the notional net income will be estimated in the standard period—not the net income earned in the period of charge but what can be estimated as the probable income in the standard period if the property had not been blitzed. I submit that that is a fair proposition. There is a proviso to secure that any interest upon a value payment which is attributable to the standard period shall be set off against such estimated net income. That would be only fair to the Revenue.
Subsection (3), which, I hope the Treasury will agree, is desirable in itself, quite apart from the merits of the Clause as a whole, provides that interest on value payments shall be deemed to be spread over the whole period from the occurrence of the damage to the date of payment.
The Chancellor of the Exchequer has assisted the rubber companies by enabling them to select, as their standard period, the years 1949 and 1950. I am asking the Chancellor to give us a different remedy, although, I submit, our claim is identical, in principle, to the claim of the rubber companies. The owners of blitzed properties, which were earning nothing during the standard period, were deprived of their income, through no fault of their own, in precisely the same way as proprietors of the rubber companies.
I do think that the method which I am proposing in this Clause is better than the one the Chancellor has used in connection with the rubber companies. It may be true that his new arrangement, by which companies can select, if they choose, the years 1948 and 1949 as their standard period, may be helpful to a number of companies with blitzed properties, but it certainly does not go very far and, in the case of many companies, 1312 will not help at all. That is a general matter in the Finance Bill, and I am asking the Chancellor for direct assistance, in the case of these companies with blitzed properties, so that like may be compared with like. I think that should appeal to the Treasury.
In the idea of this Excess Profits Levy, it is essential that there should be some comparable conditions in the period of charge and in the standard years. Unless there are some comparable conditions, the tax cannot possibly be just. In the cases I have mentioned, it was impossible for these properties to earn anything at all in the standard period. Therefore, with the Bill as it stands, they will have to pay Excess Profits Levy upon the whole of the net income in the chargeable accounting period. I hope very much that the Treasury will agree and will be prepared to give the remedy I seek.
§ Mr. Maudling
I suggest that this new Clause should be considered in the light of the concessions introduced by my right hon. Friend in the course of this Committee stage, some of which will give very considerable relief to the type of property my hon. Friend has in mind. Particularly, I am referring to the new standard period, whereby companies are given the option of choosing two out of three standard years. In this case they will automatically choose 1948 and 1949. It should also be considered in the light of the other concession, the new net asset basis as at 31st December, 1951, which will go a long way towards assisting in this case.
The Clause, as drafted, would, I am advised, cover the case of a trading company as well as that of a property-owning company. As it is to the property-owning companies that my hon. Friend has directed attention, I will deal with them. Regarding a property-owning company, I understand that, in the case of value payments, they commenced to be paid by the War Damage Commission in November, 1947, so that most companies should have received money during the standard years.
Where this is the case, then the whole of the interest payment, and not only part of it, as I understand it is proposed in the new Clause, will fall to be included in the company's profits for the standard years, and the company's profits will also 1313 receive the value payment from the War Damage Commission. In an exceptional case where the value payment was not received until after the end of 1949, the company may now elect to have the standard basis of their capital or net assets at 31st December, 1951.
With regard to the cost of works, in the type of case where property was repaired before 1st January, 1948, of course, there is no problem because the Chancellor has given the companies the opportunity of choosing the years 1948 and 1949 as their standard. Where the property was not repaired until after the beginning of the year 1948, I suggest to the hon. Baronet that any hardship cases which have arisen or may arise will also be met by the proposals to which I have already referred, which enable companies to take an alternative standard based on the net assets of the company as at 31st December, 1951.
My right hon. Friend did consider carefully the proposal contained in this new Clause. He considered it, as I have said, in the light of the Amendments he has introduced. While they may not have gone the whole way to meet the hon. Baronet, he feels in the circumstances that they meet the substance of his point. Therefore he feels that he cannot accept this Clause.
§ Mr. Cyril W. Black (Wimbledon)
While my hon. Friend the Member for Sutton Coldfield (Sir J. Mellor) and other hon. Members may feel obliged for such concessions as have been made in the course of our debates, and to which reference has been made, it is quite clear these concessions do not meet fully or adequately in any way many companies which would have been relieved under the terms of this new Clause.
I wish to draw the attention of the Committee to one particular case which, I suggest, is typical of a great many other cases of a similar kind. I should like to make it clear at the outset that I happen to have a personal interest in the company whose case I am going to mention. I mention it simply because I have the figures relative to that particular company. I am quite certain there are many other cases whose circumstances would be more or less similar.
1314 This is the case of a property investment company owning quite a wide range of property in the Greater London area. Four properties were so seriously damaged by enemy action during the war as to produce no revenue until the time when they were repaired. These four properties were all classified, not as value payment cases, but as "cost of works" cases, and in no case was it possible to obtain a licence to repair the properties during the three years on which the standard profits are to be based.
The total loss of net revenue from those four properties in the case of the company amounted to £17,600,—that is an average of £5,800 a year. In the particular circumstances of this company—and I have had this matter looked into very carefully—none of the concessions to which reference has been made would relieve the position at all. The position of the company is that its standard profits are reduced artificially by £5,800 a year on an average as a result of merely fortuitous war damage which overtook four of the properties of that company.
The Chancellor has justified the Excess Profits Levy on what he has described, I think, as the moral case in its defence. In the kind of circumstances which I have outlined there can be no moral justification whatever for imposing an excess profits levy on the revenue of a company which in the standard period has been artificially reduced as a result of war damage to properties which could not be repaired until after the three standard years were over, and I should like to ask him to look at this matter again. The case is not met in any of the concessions, and I suggest that very much less than moral justice is being done by allowing this type of case to go unrelieved.
§ Mr. C. N. Thornton-Kemsley (Angus, North and Mearns)
Had I not such a great regard for my hon. Friend the Parliamentary Secretary to the Ministry of Civil Aviation I might have reminded him of some words contained in Chapter 18 of the Book of Proverbs—He that answereth a matter before he heareth it, it is folly and shame.I am sorry the hon. Gentleman rose so early to give an answer obviously prepared beforehand for him, for I feel that 1315 my hon. Friends the Members for Sutton Coldfield (Sir J. Mellor) and Wimbledon (Mr. Black) have made an unanswerable case.
Like the hon. Baronet, I ought to disclose an interest, in that I direct a company which owns property and which would derive benefit if this new Clause were accepted and incorporated in the Bill. I should like to add that my one regret about it is that it is not drawn wide enough. It might well have been drawn to cover the great number of companies who own properties which themselves would not fall within the narrow definition of the Clause.
Let us take an entirely fictitious example which comes to my mind, that of a company which owned a block of offices or perhaps shops which were blitzed during the war and which have, for one reason or another, not been rebuilt. The licences were not forthcoming or there had not been co-operation, perhaps, from the authorities or permission to rebuild and so during the standard period there was no income at all from what was in effect a vacant site. One would think that it is quite unfair in comparing one year with another, assuming that these offices were rebuilt last year and produced a large income this year, to compare this year with the standard years when these properties were nothing but a hole in the ground. That seems so obvious a case that I think it is worth consideration by the Treasury.
I cannot really think that in the answer which we were given a little too glibly tonight the Treasury have considered the implication of cases like this. Therefore, I would ask that the matter be looked at again, because there is a genuine need for amendment on these lines, and I beg to support the plea that has been made.
§ Sir J. Mellor
I must express great dissatisfaction with the reply we have 1316 received. My hon. Friend who replied on behalf of the Government made not the slightest attempt to deal with the principle involved. He merely held out some hope that some of these companies which are affected might, perhaps, if they were lucky, get some benefit from some of the other reliefs which the Chancellor has now produced.
I raised this as a matter of principle, and I asked for it to be dealt with as a matter of principle, but as a matter of principle it has been ignored. Therefore, I cannot possibly withdraw the Motion and must leave the Committee to decide its fate.
§ Question put, and negatived.
§ Mr. R. A. Butler
I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
It hardly seems worth starting a new Clause now at this hour. I have been very anxious about the time we should have to spend tomorrow on finishing the Bill, and I must warn hon. Members that it will be essential to get the Bill so that none of us is inconvenienced in any other way by leaving it standing over.
I understand that there are now one or two discussions, about which I was not clear when I made my decision about finishing at this time tonight, on entertainment allowances, which are likely now to lead to a debate. My decision was taken without that information, but I think it is too late to go back on it now. I think we shall be able to get through tomorrow, but I was anxious to divide up the work so that we sat late neither tomorrow nor tonight. In the circumstances, I think we shall get through if we all carry on in the same sensible spirit.
§ Committee report Progress; to sit again Tomorrow.