§ Considered in Committee [Progress, 11th June].
§ (Sir CHARLES MACANDREW in the Chair] Clause 13.—(ADJUSTMENT OF GENERAL TAX LIABILITY BY REFERENCE TO BUSINESS LOSSES, ETC.)
§ 3.50 p.m.
§ Mr. G. P. Stevens (Portsmouth, Langstone)
I beg to move, in page 8, to leave out line 45.
I believe that the principle of "one man, one income" should apply more widely than it does. It is true that for administrative purposes it is convenient to divide a taxpayer's income under five Clauses and separate Schedules but to keep those different parts of the same taxpayer's income in different categories can very often inflict quite a serious hardship. Clause 13 is a very small but, nevertheless, welcome step towards a principle which, I believe, should be more generally applied.
I think that in Clause 13 I recognise a recommendation in the Report of the Committee on the Taxation of Trading Profits, otherwise known as the Millard Tucker Report of which, for the sake of greater accuracy, I have obtained a copy. Paragraph 82 of that Report contains, at its end, this specific recommendation:… we recommend the introduction of a provision under which a business loss could be carried forward and set against non-business profits for one year and one year only.It seems to me that Clause 13 sets out to implement the recommendation of the Millard Tucker Committee, but line 45 of the Clause makes a proviso which is certainly not mentioned in paragraph 82 of the Committee's Report. It is a proviso that the business in respect of which the loss is incurred and the claim is made must still be carried on by the taxpayer in the year for which the claim is made. There is no such proviso recommended in paragraph 82 of the Millard Tucker Report. On the contrary, there is a very definite warning that:The tax payer who had made a considerable loss and would otherwise have closed down his business would find it advantageous to keep it alive in order that he might be able to carry forward the loss and set it against his non-business income.747 That is a warning against line 45 and it is for that reason that I suggest that the line should be omitted.
I am grateful to the Chancellor for the Clause and the concession contained in it, but I regret that the Tucker lily has been spoiled by the Treasury gilt. I hope that the Chancellor will do away with the gilt.
§ The Solicitor-General (Sir Reginald Manningham-Buller)
I regret that the Government cannot accept the Amendment. I think that my hon. Friend is misinterpreting paragraph 82 of the Millard Tucker Report, which Clause 13 seeks to implement. My hon. Friend read out part of paragraph 82, but if he relates it to the words which precede that part he will see that the Tucker Committee were rejecting any general provision enabling the carrying forward of a business loss and setting it against income arising from investment reserves. The passage my hon. Friend read to the Committee follows upon that, and in my view there is a clear implication from that passage, and from the paragraph as a whole, that the Committee were not intending to enable this advantage to be gained by someone who had ceased to carry on his business.
It is for that reason, and, indeed, to carry out the Millard Tucker Committee recommendation in paragraph 82 in its entirety, that the words which my hon. Friend seeks to have omitted were inserted in the Bill. My hon. Friend will see in another part of the Committee's Report the proposal relating these words to terminal losses. That might be a more appropriate place to deal with the point he has in mind.
§ Mr. Eric Fletcher (Islington, East)
I am sorry that the Solicitor-General is not able to accept this Amendment, because as I read the Millard Tucker Report, although it is true that the Report is silent on this particular point, I should have thought, as did the hon. Member for Langstone (Mr. Stevens), that the fair implication of what the Report suggests is that this Amendment should be accepted.
If the Solicitor-General will study paragraphs 81 and 82 of the Millard Tucker Report again he will find that the Committee reject, first of all, the suggestion that a taxpayer in business should be 748 able to set off his losses over a period of years if he closes down his business. They reject the suggestion that if the trader closes down his business he should be able to set off his losses in his last year against earned income from other sources or unearned income in future years.
The Millard Tucker Committee specifically recommend, however, that a business loss should be carried forward and set against non-business profits for one year and one year only. They do not suggest or say anything from which it can be adduced that it would be unreasonable that the advantage should be given to the trader who makes a loss and carries on his business or to a trader who ceases trade. They point out, further, that hardship frequently occurs when a trader closes down a business, and it may well be necessary to give this relief to a trader who closes down a business as well as to a trader who continues his business.
I should have thought, therefore, that the whole of the argument which led the Millard Tucker Committee to make then-recommendation, on which Clause 13 is based are, to say the least, sufficient to justify the sense of the proposed Amendment. I hope, therefore, that the Solicitor-General will be able to give an assurance that he will look at the matter again with a view to reconsidering it on the Report stage.
§ Mr. Stevens
It is an odd thing that though we have been speaking the English language for a very large number of years it is very difficult for people to agree on what simple words appear to mean. I have paid great attention to what the Solicitor-General has said about paragraph 82 of the Millard Tucker Report and I shall consider what he has said very carefully. If I come to the same opinion as the Solicitor-General I shall have nothing further to say; otherwise, I shall seek an opportunity to raise this point again on another occasion.
§ The Solicitor-General
The passage which I think carries the implication that this relief was not intended to apply to a business that ceases to exist is the passage in paragraph 82 of the Millard Tucker Report which my hon. Friend read. It states:The taxpayer who had made a considerable loss and would otherwise have closed down his business would find it advantageous 749 to keep it alive in order that he might be able to carry forward the loss and set it against his non-business income.That would appear to me to imply that the Millard Tucker Committee were not in favour of such a loss being carried forward where a business ceases to exist. I merely mention those words because it is upon those words that I was founding my argument that this Clause, in its original form, carries out the recommendation. I thought it was right to mention that to my hon. Friend.
§ 4.0 p.m.
§ Mr. G. R. Mitchison (Kettering)
May I ask the Solicitor-General when, as I hope he will, he reconsiders this matter, to bear in mind that there may be rather undesirable social consequences unless the position is clarified? If a man has suffered a very considerable loss in the year, which is regarded as a possibility in the Millard Tucker Report, he will be tempted to prolong business in circumstances when it is not desirable that he should do so and in circumstances which may cause a good deal of trouble and even hardship to other people—for instance, to people who are working for him.
I should have thought that there were, generally speaking, in the tax legislation provisions for dealing with losses in the last year of any business which might be applied in this case. I appreciate the difficulty involved in considering this matter, but I hope the Solicitor-General will consider it seriously and sympathetically. Personally, I think the Millard Tucker Report is far from clear on this matter, and I rather doubt whether this point has been considered or reported on by the Committee. One knows how clearly they express themselves, and one feels that they would not have left this matter to an implication to be derived from the language used in respect of another matter.
§ Mr. E. Fletcher
I am tempted to intervene again in view of what the Solicitor-General has said. I suggest that the sentence which he read from the Millard Tucker Report does not carry the interpretation put upon it. I think the reverse is the case. I think that the Report is saying in that sentence in paragraph 82 that in the circumstances with which they are there dealing, if another suggestion had been adopted there would be a temptation on a taxpayer to carry 750 on a business merely for the purpose of getting this relief. I should have thought that unless this Amendment were accepted there would be the temptation, to which the Millard Tucker Committee referred, on a tradesman to carry on his business for another year merely to get the tax relief which this provision in its present form gives.
If the Amendment were accepted the trader would do the normal thing and close down his business, which is what he ought to do, and would get his tax relief although his business had ceased for a year. That is the sensible thing to do. Unless this Amendment is accepted and if a trader is required to be carrying on his business at the time when he makes this application for relief, he will be tempted to carry it on for a further year merely to get the benefit of the provision.
That would be undesirable in the interests of the business, and it is for that reason, which the Millard Tucker Committee pointed out, that the trader ought not to be exposed to the temptation of carrying on his business unnecessarily for another year. As I understand it, that is the whole object of this Amendment and I hope the Solicitor-General will reconsider the point.
§ Mr. Hugh Gaitskell (Leeds, South)
As I understand, the Solicitor-General rests his case on the recommendation, as he sees it, of the Millard Tucker Report. There seems to be a certain amount of ambiguity in this paragraph, and I think hon. Members in all quarters of the Committee are agreed about that. It occurs to me that perhaps, in the circumstances, the Government might consider asking the Royal Commission to look at this matter again and give their advice upon it. I appreciate that they will be, in the main, concerned with much broader and weightier issues. Nevertheless, I think it is as well that they should also act, as it were, as a longstop on these detailed points of tax law, and possibly the Solicitor-General would like to consider that suggestion. I appreciate that we shall have to wait another year before the Report comes out, but I think they ought to look at it.
§ Amendment negatived.
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."751
§ Mr. E. Fletcher
Would the Solicitor-General explain to us why the other recommendation contained in this part of the Millard Tucker Committee Report has not been dealt with? I am thinking of paragraph 83. At the end of that paragraph the Committee say in connection with this matter:There is a long-standing administrative concession under which the Board of Inland Revenue in certain circumstances and on certain conditions, permit a capital allowance to create or augment a loss for purposes of Section 34. We think that the existing practice is reasonable and recommend that statutory sanction should be given to it.I think we all agree that if there is a matter of this kind which gives concern——
§ The Chairman
Order. I think we are also all agreed that on this Motion we cannot discuss anything which is not in the Clause.
§ Mr. Fletcher
With respect, Sir Charles, this arises on Clause 13, which relates to "Adjustment of general tax liability by reference to business losses, etc.," and arises, as the Solicitor-General was in order in pointing out, from recommendations in paragraphs 82 and 83 of the Millard Tucker Report. I was hoping that before we accept the Clause as it stands, which is what we are being asked to do, the Solicitor-General would enlighten us on why this Clause does not go further than it does and tidy up this other point which is dealt with in this paragraph.
§ The Chairman
As the hon. Member knows, it would be out of order to deal with anything other than what is in the Clause.
§ Mr. Fletcher
With great respect, Sir Charles, surely if we are asked to say whether a Clause should or should not stand part of the Bill, we are entitled to consider whether it goes far enough. We are being asked to reach a decision on whether we should accept this Clause. Surely on that Question I am entitled to argue reasons why it may not be the desire of the Committee to consent because it does not go far enough.
§ Mr. Glenvil Hall (Colne Valley)
Before you answer the point put by my hon. Friend, Sir Charles, may I put this to you? Suppose my hon. Friend had 752 thought fit to put down an Amendment to include further references to the points that he has been mentioning, would that Amendment have been out of order? It would, I agree, on Third Reading, but surely not in Committee.
§ The Chairman
I would not like to answer offhand about Amendments which I have not seen, but it is clear that on the Motion "That the Clause stand part of the Bill," remarks must be confined to that Motion. We cannot discuss anything else.
§ Mr. Fletcher
I submit, Sir Charles, that this discussion has a general bearing on that Motion. Surely the Committee are entitled to consider whether the Clause is complete before we accept it. I suggest that the Clause is incomplete. With great respect, I should have thought that I was entitled to address arguments in support of my contention that the Clause is incomplete and should not be accepted. It is quite a small point.
§ The Chairman
It may be a small point, but we still can discuss only what is in the Clause. I am sorry; it is not my Ruling, but that is the position.
§ Question put, and agreed to.
§ Clause ordered to stand part of the Bill.