§ Commander R. Scott-Miller (King's Lynn)
I beg to move, in page 11, line 17, after "that", to insert "(i)".
§ The Temporary Chairman (Sir Norman Hulbert)
It might be convenient to discuss this Amendment with the next two Amendments in line 23, after "and", insert "(ii)", and in line 24, after "be", insert "withheld or".
§ Commander Scott-Miller
I do not pretend that these three Amendments will decide the future of the British Merchant Fleet in any way. Nevertheless, they are of some concern to the shipping industry. They are intended to establish that the retrospective effect of subsection (5) is not intended to apply to a case where a shipowner is denied an investment allowance to which before the Budget he was entitled to claim merely because the claim is not determined in circumstances which might well be beyond his control.
If I deal with the last Amendment first, I may make clearer what I am driving at. I know the Chancellor is anxious to prevent the granting of two investment allowances for the same asset. I suppose that in the case of a ship that could arise on the completion of the building of that ship when it is sold from the owner during its construction to a new shipowner and in that way probably two claims could be made for the same asset.
Subsection (5) and the proviso as they stand, as I see it, would have the effect of depriving a shipowner of his right to an allowance altogether. The word "withdrawn" in the last but one line of the proviso means, I suppose, the taking away of something which is given, but if an investment allowance has not been determined by 9th April, which was Budget day, or in a case where an appeal against determination had not been 716 lodged by that date, there would be no allowance. Therefore, there is nothing to be withdrawn. The insertion of the words by this Amendment, "withheld or withdrawn" would become necessary. Under the proviso as it stands a shipowner who has sold his ship in the course of construction prior to the Budget but paid building instalments since his last tax computation was agreed would lose the investment allowance to which prior to this Bill he was fully entitled.
I submit that if the Amendment is accepted it would definitely bring into the scope of the Clause cases where investment allowance applies to sales which take place prior to the Budget. The purpose of the first two Amendments is quite a simple matter. It is to break the proviso into two separate parts, the first part being that which leaves unchanged the allowance determined before 9th April, and the second part that which deals with cases in which the transfer itself takes place before that date. I hope my right hon. Friend can see his way to accept these Amendments. Although I have no personal interest in shipping, I know this is a matter which is taken very seriously.
§ The Solicitor-General (Sir Harry Hylton-Foster)
I doubt whether the Committee will continue being kind to me when it knows how boring I have to be about this particular topic in order to explain to my hon. and gallant Friend the Member for King's Lynn (Commander Scott-Miller) why I think it would not be right to accept the Amendment, at all events in the form in which it is and going to the extent to which it goes. I think it would help if I might have the tolerance of the Committee in recalling why this Clause has to be here at all and what is the difficulty we have to get rid of.
It is quite a new discovery. As far as the Revenue knows, no one has ever tried to get this duplicated allowance and, as far as the Revenue knows, no one has ever been given one of these duplicated allowances. It is altogether rather an odd case. It arises from the fact that the statutory provisions providing either for investment allowance or initial allowance never required ownership of the machinery to be a condition of entitlement. So far as I know we have 717 gone on satisfactorily through our Revenue life without ever noticing this one. It meant all the time that a trader who contracted to pay, and did pay, instalment payments in advance for new plant or machinery was entitled to the initial allowance, or investment allowance as the case may be, athough he never became the owner of the machinery and, although he was wholly reimbursed for his expenditure. That can never have been the intention of Parliament, nor did anyone ever think it was. That, I suggest, is the truth.
The instance which brought it to light, to make the matter plain, is one where there was a relatively peculiar contract for building a ship. It was not one of those contracts where the property in the ship passes to the purchaser as construction goes along. It was a contract by shipping company A with the shipbuilder to build a tanker on terms that the property did not pass until delivery. The shipping company paid instalments. Then, when the tanker was partly built, and, for reasons wholly unassociated with taxation, it wished to get rid of its rights under the contract, and the matter was dealt with by shipping company B taking over the tanker, as it were, the matter being disposed of by the shipbuilder repaying shipping owner A and then making a new contract with shipping owner B for the full price.
That exactly raised the difficulty, because shipping owner B was obviously entitled to the full investment allowance in relation to his expenditure; and when we came to look at the position of shipping owner A, he would say, "Look at my expense as far as the instalments went", and there was no answer to him. In case anybody identifies the companies from what I have been saying, I would point out that the sole concern of shipping Company A in the circumstances was not to get the allowance itself but to make sure that shipping company B would be entitled to it in full.
The loophole has now been revealed, and I do not want to put any wicked thoughts into anybody's head but I want to mention the problem in order to show my hon. and gallant Friend why I cannot accept his Amendment or any Amendment which goes as far as this. If the 718 two companies were associated and shipping company B reimbursed shipping company A, and did so at an inflated value, then shipping company B would have a good prospect of getting an investment allowance better than the whole expenditure of shipping company B justified. One has to look at the position and to see what is the right remedy.
I wish to emphasise that this Clause makes no change at all in the existing practice. Everybody has operated on the basis, as far as we know, that nobody was entitled to these duplicated allowances, and nobody has ever had one. What is here involved is not the question of denying to some trader an allowance which some other trader has already had. That point does not arise, and that is why we thought that the degree of retrospection in the first part of subsection (5) is clearly right here. It follows precedent where a technical flaw in the law has been discovered which upsets the practice on which everybody has been working all the time. That is why the subsection takes this form.
I do not know whether my hon. and gallant Friend has thought out what his Amendment would do to its full extent. As the proviso now stands, unamended, where the transfer of rights under the contract took place on or after Budget day, there is no issue between us at all and the correct result, in everybody's view, is obtained. Where the transfer of rights under the contract happened before Budget day and the trader has made his claim and that claim has been determined, then that allowance cannot be disturbed under the Clause, nor can it be disturbed if there has been an appeal in due time before Budget Day against the determination already made in respect of the allowance.
The one case it is necessary to keep out, of course, is the case where no claim has been made, for this reason: possibly nobody was ingenious enough to think of this claim before, but now the position has been much publicised by the Bill, and my hon. and gallant Friend's Amendment would leave it open to a trader who has never previously thought of making a claim to make one now, and perhaps to make one for some future time on the basis of what is now revealed.
It is some future time, because my hon. and gallant Friend will remember that all 719 these capital allowances are geared to the doctrine of the basis period. They are given at the time of the assessment in relation to the expenditure of the basis period, normally the preceding year. Under the Amendment, if it were incorporated in the Bill, one could claim these allowances, on the inspiration which this Clause has given, for the assessment year 1957–58, the current year, and in the case, I suppose, where the expenditure has occurred very shortly before Budget day, one might get the claim into assessment for 1958–59, opening a very wide door.
I could not advise the Committee to expose the Revenue to the obvious risk which would be involved in adopting an Amendment which would permit that. On the other hand, my hon. and gallant Friend referred to one case which I confess I should like to look at again. That is the case where a claim was made before Budget day— I do not believe the person mentioned exists—but supposing it were so and through business in the Revenue office or the like there had not been determination of that claim. Clearly in logic or, indeed, in kindness to that hypothetical person, I ought to include him. I am not sure that the words as they stand do so, and I should like an opportunity to look at this again.
§ Mr. D. Marshall
I am not very happy, with that answer, and I should like to tell my right hon. and learned Friend why. As far as I could gather, he said that Clause 14 had been introduced because certain things had been discovered which nobody had really thought of and that the Clause more or less set that right. My hon. and gallant Friend the Member for King's Lynn (Commander Scott-Miller), shares, I think, the view that the principle underlying the Clause is perfectly in order. No one has any objection to it at all.
At the same time, the Amendment tries to put a stop to a certain number of things that would, if they happened, make equity not equity, but inequity. My right hon. and learned Friend has admitted that the introduction of Clause 14 has become necessary because certain things were not thought of, so it is more than likely that the things coming under the Amendment may not yet have been thought of at the Treasury. I would, 720 therefore, have expected the Solicitor-General to have suggested that this matter would have deeper consideration.
Apart from that, I am the more in agreement with my hon. and gallant Friend because of something which the Solicitor-General has said. He said that it might well be that in certain circumstances people could have been entitled to a certain amount of relief for which they had not claimed, but because of the spotlight put on it by Clause 14 they might realise that, and the Treasury might then have lost some money which, in fact, it should have lost before. If I understand that aright, I do not like it at all.
It may well be that I have misunderstood my right hon. and learned Friend, but if his major point is that there were certain forms of relief to which people or companies were entitled but which they had not discovered and that by the focussing of attention upon this Clause they might well discover, and that therefore, they must be stopped, I do not consider that that is the type of approach that hon. Members would like to see; in other words, that the Treasury should "get away with it".
§ Sir L. Ropner
I should like to repeat that I am wholly behind the intention of Clause 14, but it has been alleged by those who, at any rate, profess to be tax experts that the Clause stops people doing what they might legitimately be allowed to do. I confess to my right hon. and learned Friend that I found it very hard to understand the brief with which I was provided in order to speak on the Clause, but I must also confess that I found it equally hard to understand his reply.
What I should like from the Solicitor-General is an assurance that the fears which are quite obviously genuinely held by the legal and taxation experts of the shipping community are not justified but that, if they are justified, he will repeat his assurance to look at the Clause before the Report stage.
§ Mr. G. R. Mitchison (Kettering)
The debate on this Amendment throws a very interesting light on the point of view of the shipping community. I gather that the shipping community, or somebody representing it, must have provided briefs to the three hon. Members opposite who have just been addressing us.
§ Mr. Mitchison
Perhaps only one; perhaps the others thought of it on their own. But one of them, at any rate, said that all this had the support of the shipping community. In a way, it is not very pleasant to get up and support the Government, as I am about to do, but let me just point out how the matter strikes me.
§ Sir L. Ropner
I should like the hon. and learned Gentleman to enlarge on his objection to representatives of a large and important industry advising Members of this Committee. Has he never been advised by any industry or any section of any industry? I am bound to say that his speeches sometimes make us think that he has not.
§ Mr. Mitchison
I am all for it being done. We on this side of the Committee have not that insight into the minds of shipping magnates that some hon. Gentlemen opposite have, and any stray light that can be thrown on their intentions or their morals gives us great pleasure and, may I add, some edification. The hon. and gallant Member for Barkston Ash (Sir L. Ropner) should not complain that we show interest in these things. We are profoundly interested in the views of this great industry, as instanced in this Amendment.
Parliament passed an Act, with the intention that an investment allowance should be given in certain cases. One of them now is the provision of a new ship. Parliament obviously intended that one person, and one person only, should get a single investment allowance in respect of a single ship. No one, I imagine, disputes that proposition. I gather that the industry, into whose mind I am so interested to inquire, accepts that general proposition.
It is now told that it was possible to get more than one investment allowance in respect of a single ship, and it is further told that no one tumbled to this and that, so far as the right hon. and learned Gentleman the Solicitor-General can tell us, no one has, in fact, succeeded in getting more than one investment allowance out of a single ship. So much the better. In this remarkable instance, the Government, having themselves discovered the loophole, are stopping it before anybody gets through.
722 In the light of what the right hon. and learned Gentleman has told us, we now have hon. Members getting up and saying that, while nobody knows of such a thing having happened, they wish none the less to be assured that, in the words of what is proposed,the allowance shall not be withheld or withdrawn by virtue of this Section by reason of any event occurring before theBudget. That is what the Amendment proposes.
It is perfectly obvious that, if anybody had to any extent tumbled to the device, and if anybody, indeed, had taken action which might now enable him to avail himself of the device, he would be protected by this Amendment. I entirely and respectfully agree with the right hon. and learned Gentleman when he says that that is far too wide.
After all, it is a tolerably simple sentence. I can quite understand hon. Gentlemen saying beforehand that something or other might or ought to be done about this, but to get up after that explanation and say that, none the less, there ought to be this wide concession— I will not call it protection—made in a case of that kind, seems to me to throw a rather curious light on their own state of mind and makes me particularly interested to know the contents of the brief which this great and important industry, or some part or association of it, or something or other to do with it, furnished to at least one of the hon. Gentlemen who have addressed us.
Therefore, I regard the Clause as a good Clause. I am not quite certain that I entirely agree with the right hon. and learned Gentleman in saying that, having told us that no one has taken advantage of the Clause, he now proposes to try to find someone who may have taken advantage of it, for that is what I understood he said. With that small and probably meaningless exception, since, apparently, nobody has done it, I cannot see anything to quarrel at in the Clause, but I can find a lot to quarrel with in the very wide words of the Amendments.
§ Sir L. Ropner
The hon. and learned Member for Kettering (Mr. Mitchison) has complained about a curious state of mind. The Committee can judge who is suffering from a curious state of mind 723 here this evening. I thought it had been made perfectly clear from these benches that the shipping industry is wholly behind the intention of the Clause. What we think the Government are doing is something which they do not intend to do. If the hon. and learned Member really wants to see the information and advice which I have received from the Chamber of Shipping of the United Kingdom, he is quite at liberty to see it if he can bother to ask me for it after the debate, which I very much doubt.
§ The Solicitor-General
I am obliged to my hon. Friends for putting down their Amendment, because it revealed to me that I have missed a case which, in logic, I should have included in my proviso. I do not believe that that case exists, but it would be unfair not to include it. That is why I am grateful to my hon. Friends. The particular case is one in which a claim had been made before Budget day, and which, therefore, was in no sense inspired by the Clause, and which, owing to business in the Revenue office or the like, had not been determined before Budget day. I am grateful to my hon. Friends for drawing my attention to it.
For the rest, the anxiety of my hon. Friend the Member for Bodmin (Mr. D. Marshall) is entirely my fault. I failed to make plain to him that all that the Clause is doing, in our belief and view, is continuing the practice on which the whole community has been operating all the time, and never doing anything else. If any hon. Member, in any part of the Committee, knows of any case in which somebody has had or has claimed a duplicated allowance, if this mythical being really exists, I can only say that I will be grateful if, before the Report stage, I can be furnished with particulars of it.
§ Amendment negatived.
§ Clause ordered to stand part of the Bill.