HC Deb 26 May 1954 vol 528 cc512-21
Mr. Jay

I beg to move, in page 6, line 26, to leave out subsection (5).

This Amendment is moved mainly in order to elicit from the Government an explanation of the meaning and purport of the subsection. I must warn the Solicitor-General that he almost invariably gives explanations contrary to those we receive from the Financial Secretary, so we shall examine carefully what he says and put further questions to the Financial Secretary on the Report stage to see if he gives the same answer.

This is a simple subsection and reads: For the said purposes a vehicle designed to be mechanically propelled shall be deemed to be mechanically propelled, whether or not complete with an engine and other parts and accessories required for the purpose. I think the Committee will agree that this deserves brief examination. I have known occasions, for instance in General Election campaigns, when a vehicle designed to be mechanically propelled unfortunately was not, in fact mechanically propelled because it was not complete with an accessory required for that purpose.

I do not think it would have been any comfort to me, or to my assistants, on such occasions, to have sat down and deemed ourselves to be somewhere where we wanted to be but were not. Nor, I imagine, would the Whips on either side of the Committee accept the explanation that, although one was not in the Division Lobby at a certain time, nevertheless one deemed oneself to have been there. Therefore, we want an explanation of the rather extraordinary intellectual process envisaged in this subsection, and its effects for tax purposes.

I suppose that the purpose is to prevent tax evasion and to ensure that some traders engaged in devious methods of making goods without parts, then getting them passed by Customs and Excise, and then adding the parts afterwards, do not entirely escape tax. But is the Solicitor-General quite sure that he has not covered too much by this provision.

For instance, does the phrase, "a vehicle designed to be mechanically propelled" cover a vehicle which is capable of being mechanically propelled? I saw in the Strand yesterday what I should have called an ordinary pedal bicycle, but which was on that occasion being mechanically propelled because it had attached to it a small engine. Would the Customs argue that since any bicycle, so far as I know, is capable of having such an accessory engine attached to it, is, therefore, a vehicle designed to be mechanically propelled?

I believe that the Parliamentary Secretary to the Ministry of Housing and Local Government normally comes to the House on a pedal cycle which one sees in New Palace Yard. Would it be possible for the Customs to try to impose a tax upon him on the grounds that his bicycle, though not mechanically propelled, was nevertheless designed to be so propelled? These are some of the questions that spring to one's mind from an examination of this subsection. No doubt we shall have a most ingenious explanation from the Solicitor-General, even though we may have a contrary one on the Report stage.

The Solicitor-General

I feel that on this occasion, as indeed on most, my right hon. Friend the Financial Secretary and I speak with the same voice. I am not sure that I can say the same about the right hon. Member for Battersea, North (Mr. Jay). I cannot help feeling that when he spoke on the Finance Bill in 1950 he was probably called upon to make the speech which I am now going to make in answer to a speech made by my right hon. Friend the Financial Secretary, on which the right hon. Gentleman has modelled the speech which he has just made to the Committee.

Section 18 (3) of the Finance Act, 1950, reads as follows: For the purposes of the said enactments a chassis designed for a mechanically propelled vehicle shall be deemed to be mechanically propelled, whether or not complete with an engine and other parts and accessories required for the purpose, … The Clause which we are now discussing applies to a motor vehicle the wording which was applied in 1950 to a chassis.

Mr. M. Follick (Loughborough)

This is much wider.

The Solicitor-General

I quite agree that it is much wider. The actual words with which the right hon. Member for Battersea, North most justifiably made such play were taken from Section 18 (3) of the 1950 Act relating to chassis. Those words have been inserted in this year's Bill and applied to mechanically propelled vehicles for precisely the same reasons as they were then inserted in relation to chassis.

As I am sure the right hon. Member will remember, the Purchase Tax liability was expressed to fall upon mechanically propelled vehicles, and the difficulty in 1950 was in cases where a chassis was sold and the engine was fitted afterwards. It was for the purpose of bringing that into the tax and not letting it pass the tax point that the amendment was made in 1950. It is for the same reason that we now find it necessary to make a similar amendment in relation to motor vehicles.

There are signs of a possible development of the practice of selling motor vehicles without the parts which are necessary for their mechanical propulsion, and so avoiding or reducing the liability to tax. The right hon. Member for Battersea, North made some play about mechanically propelled bicycles. I was interested that he should do so because there was a decision on the matter in the High Court. In 1952 it was held that a bicycle with motor attachments from which one or two essential parts, perhaps a sparking plug, had been removed was not a mechanically propelled vehicle for the purposes of compulsory third-party insurance.

If that decision were extended or applied to this tax it might well be that one would have motor cars passing without paying full tax liability solely because of the omission to fit a petrol tank or sparking plugs or something of that sort before sale to the purchaser. I hope I have explained to the right hon. Member what this subsection is intended to deal with. I must admit that the words are at first sight curious, but I think they are adequate to achieve the purpose we desire and I commend them to the Committee.

9.0 p.m.

Mr. G. R. Mitchison (Kettering)

I do not think back benchers can let this pass on the conspiracy of nonsense between the two Front Benches. The only defence put up by the Government for this legislative absurdity is that the previous Government did it, too. In the interests of plain English I think we want a better defence than that. It appears that, in practice, one may sell a car to be made up by the purchaser and it is to protect that practice that this curious piece of legislation is intended.

I agree that there are difficulties. This subsection may be to meet the case of the Ford car which, after having been driven 30 miles into the desert, then stopped and was found to have gone so far on its reputation alone. Any car which behaves in that way must be taxed somehow or other.

The next point which bothers me is whether on this, as on the railway journey which one finds more difficult nowadays it can be asked, "Is it really necessary?" I should have thought the Commissioners were sufficiently protected and sufficiently powerful under subsection (2). There is a fruity bit here. The Commissioners can determine for any goods of a prescribed class. That is to say, for mechanically propelled vehicles, what parts and accessories are for those purposes to be deemed to belong to such goods when complete and what type of any part or accessory deemed to belong to such goods when complete, goods lacking that part or accessory are to be treated for those purposes as having. If the sparking plug is left out would they require to have recourse to subsection (5)?

Perhaps this subsection has been put in to replace obscurity by absurdity and to replace subsection (2) by subsection (5). Let me confess that subsection (5) is much the clearer as it is a more patent absurdity than the other subsection. It is a matter of choice which we prefer, but it seems unnecessary.

I wish to put this philosophical difficulty because I feel that on Finance Bills the metaphysical elements in our taxation system and, indeed, in the Treasury, have full play. May I point out to the Government the very remarkable position? Apparently for the purposes of this subsection a mechanically propelled vehicle need not have an engine nor any other part nor accessory required for the purpose. Therefore, we could take four wheels and each of them may be deemed to be a complete motor car. It may well be that my right hon. Friend did something foolish and absurd in the past, but surely the practice should not be continued. Is it not possible to provide, in more simple English, the Commissioners with the powers which they require? The taxpayer, undoubtedly, will be quite unable to understand what this Clause is about, but no doubt the Commissioners will, and that is a bit one-sided. Could not we have it more simply and less absurdly, please?

Mr. Albu

Sometime during the Committee stage of a Finance Bill an hon. Member such as myself has to get up to speak not on the legal position, but on such questions as whether the omission of a sparking plug from a motor car would make it cease to be a mechanically propelled vehicle. Without wishing to be insulting, I do not see why the Commissioners would be so foolish as to think that. What was said by my hon. and learned Friend the Member for Kettering (Mr. Mitchison) covers this point, in my opinion, whatever decision may have been made with regard to a motor car for a completely different purpose. I do not know if a legal decision arrived at for one purpose may be interpreted by the Commissioners to cover a different purpose. I should not think that is the case. I cannot see why the Treasury should become worried about a legal decision which is concerned entirely with insurance.

The point I wish to press was made by my right hon. Friend the Member for Battersea, North (Mr. Jay). I am not certain—and the Financial Secretary will no doubt correct me if I am wrong—but I think I am right in saying that the rate of Purchase Tax on a mechanically propelled bicycle is not the same as the rate on an ordinary bicycle.

Mr. Boyd-Carpenter

indicated assent.

Mr. Albu

If that be the case I think that there is some validity in the point made by my right hon. Friend. If an hon. Member buys a bicycle, can it be interpreted to be an incompleted mechanically propelled vehicle because it is possible to buy an engine to add to it and make it into a mechanically propelled vehicle? Indeed, it is not quite so simple as that, because today bicycles of the type which are made to carry engines, which may be fitted to them later to make them into mechanically propelled vehicles, are made of a special strength. What happens if someone buys such a bicycle and fits the motor when he has time? What rate of Purchase Tax is to be charged on such a bicycle because it may well carry a motor? Is it to be counted as a mechanically propelled vehicle?

As more mechanically propelled bicycles are used and sold it may become the practice of manufacturers to strengthen all bicycles so that they may carry motors, if it is so desired. Would they all then be liable to the higher rate of Purchase Tax? I am not certain of the rates, but I gather from the nod given by the Financial Secretary that there is a difference between the rate for a mechanically propelled bicycle and an ordinary bicycle, and if that is so my hon. Friend's point is valid. I think this may lead to considerable confusion because of the difficulty of distinguishing between a bicycle capable of being fitted with a motor and a bicycle which is propelled by human energy.

Mr. Follick

What about a motor scooter?

The Solicitor-General

I think that motor scooters will fall into their proper place in the reply which I am about to make.

With regard to subsection (5), the hon. Members for Edmonton (Mr. Albu) and Loughborough (Mr. Follick) will notice that the definition applies to vehicles which are designed to be mechanically propelled. That is to say, the actual designing of the vehicle must involve mechanical propulsion. There may often be a fine division between a vehicle which is capable of having a mechanical unit attached to it and a vehicle which is designed for mechanical propulsion, and there may be some borderline cases. The ordinary bicycle is, clearly, not a vehicle which is designed in its manufacture for mechanical propulsion.

Mr. Albu

More and more bicycles are being made in such a way that they can have a mechanical unit fitted to them afterwards. I should have thought that they would be of different construction and lighter if the manufacturer did not bear in mind the fact that they might later have motors fitted to them. I should have thought that that made a considerable difference.

The Solicitor-General

I am not sure whether the hon. Member is right in assuming that bicycles of that sort are now being manufactured. The Clause deals with vehicles which are designed for mechanical propulsion. That is the test.

The hon. and learned Member for Kettering (Mr. Mitchison) suggested that subsection (5) was unnecessary because of subsection (2). I hope that, on reflection, the hon. and learned Gentleman will agree that that is not so. Subsection (2) begins: It shall be for the Commissioners to determine for any goods of a prescribed class … Subsection (4) says: In this section the expression 'prescribed class' means mechanically propelled vehicles and such other classes of goods … Therefore, to bring goods within the terms of subsection (2) they must come into the "prescribed class," and mechanically propelled vehicles will fall into that "prescribed class." That brings me back to what I was saying earlier when I dealt with the necessity for defining mechanically propelled vehicles as being vehicles designed to be mechanically propelled even though at the time the manufacturers omit the propulsive power or some other part or accessory required for the purpose of mechanical propulsion. I explained to the Committee the necessity for using that language, based on the 1950 Act in relation to chassis.

When we have reached that stage and have got the goods in the "prescribed class," subsection (2) comes into play because it deals with the sale of such vehicles; that is, without what might be regarded as their normal equipment. Subsection (2) would, for instance, deal with the practice, if it arose, of selling motor cars unpainted or without the usual spare tyres. Such matters would come under subsection (2) and not subsection (5).

The subsection will not be used to impede the introduction of new and simplified types of car which are genuinely designed for use without many of the fittings at present ordinarily provided, such as carpets, bumpers and separate headlamps. It will be used—I hope the Committee will agree that it should be used—for the purpose of preventing avoidance of a proper tax liability.

Amendment negatived.

9.15 p.m.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Sir Frank Soskice (Sheffield, Neepsend)

I should like to ask one question on this Clause, the object of which has been clearly put before us by the Solicitor-General. I can follow the reasons which he has given for the various provisions of the Clause, but one, however, causes me some slight anxiety, because I am not quite sure how it will work, and I shall be obliged if the hon. and learned Gentleman will give me the benefit of his advice.

I refer to subsection (3). I can understand perfectly well that the Commissioners, in determining what missing parts the articles are deemed to possess for the purpose of assessing the tax, should have regard to the standard specification of that type of goods. I can well see the object of that, and it will be apparent to the Committee. What causes me some slight doubt is what is the precise object of the words that follow.

Let us suppose that the Commissioners have before them the problem of deciding, with regard to some incomplete article, what it is to be deemed to possess for the purpose of deciding whether it is a taxable article or not. Having directed their minds to the standard specification of that article and any information which they may derive from that, what are they then to ask themselves with regard to the common practice of users of such goods. After all, we are asking, in regard to an incomplete article what we are supposing it to possess for the purpose of deciding whether it is taxable or not.

I do not understand the precise relevance of the words regarding the common practice of the users of such goods. I am sure that there is a perfectly good reason, and I am also sure that the draftsmen of this Clause had clearly in their minds something to which the Commissioners should direct their attention. I feel, however, that these words may give rise to some uncertainty in the application of the Clause, and I should be grateful if the learned Solicitor-General would indicate to the Committee what precisely the Government had in mind in inserting these words.

The Solicitor-General

I did inquire some time ago as to the reason for the addition of these words. At the moment, I am not quite sure whether my recollection of the explanation I was then given is entirely reliable, and so I hope that I shall not be held to it too strongly.

My recollection—and I hope I am right—is that the intention was to try to exclude what we may call optional articles which some particular users like to attach to particular types of cars. One would not only look at the standard specification of the type of goods, from the point of view of the manufacturer of that type of article, but one would look at the other side of it to see what is the common practice of the users of such goods. I am reminded now that the explanation which I have given is correct. It is intended for that reason.

It is common to have a spare wheel on a car, and to have a horn, which is required by law, but the specifications for particular types of motor cars may contain a lare number of gadgets and accessories which the normal car user would not require, and, indeed, would not demand. It is in order to have regard to both sides of the picture that these words are inserted.

Sir F. Soskice

I am much obliged to the Solicitor-General for his explanation, which we will very carefully ponder between now and Report stage. Perhaps, as there seems to lurk in his mind some slight trace of uncertainty, he will give consideration to these words between now and the Report stage in order to determine whether they may not also be a ground for some uncertainty.

Clause ordered to stand part of the Bill.