Clause 23. —(SUPPLEMENTARY PROVISIONS AS TO SS. 20 TO 22.) (Hansard, 5 July 1960)

§ The Solicitor-General
I beg to move, in page 20, line 36, at the end to insert: (3) Where a person acquires control of a company at any time,—

(a) any sale of shares in the company, whether to that person or to a person from whom he acquires the shares directly or indirectly, which took place before that time and was effected in pursuance of arrangements for transferring control of the company, or

(b) any sale of shares in the company to another person from whom the first-mentioned person acquired them, directly or indirectly, being a sale which took place after that time and was effected in pursuance of arrangements for transferring the shares to the first-mentioned person,

shall be treated for the purposes of the three foregoing sections as a sale in consequence of which the immediate purchaser will have control of the company. The point was put to me in Committee by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth) and the hon. Member for Glasgow, Craigton (Mr. Milian) that under the Clause this position might arise. There might be a sale of 49 per cent. of the shares by a person who ultimately aimed at control, which is not caught by the Clause, followed by the sale of the 2 per cent. which gave control by a perfectly innocent shareholder who knew nothing about the 313 transaction to obtain control. That would be caught, because that is the transaction which gave control, followed by the sale of the remaining 49 per cent. to the original purchaser, which would be caught and rightly caught.
I urged that in the case of the 2 per cent. transaction, even though the vendor was in every sense an innocent person, it was not unjust to tax her. I say "her" because for some reason it was my hon. Friend's aunt who was the perpetrator of the transaction. I urged that it was not unjust to tax her because she well Id obtain her share of the trading pro it which the device converts into a capital form, and it was therefore fair enough to bring the minority shareholder within the Clause.
That argument commended itself to the Committee, but it involves that it world be unjust in those circumstances to leave out of the Clause the first 49 per cent. transaction. I am taking extreme figures in this case. Therefore, the first thing which the new subsection is designed to do is to bring the first transaction within the Clause. It also guards against the possibility of getting round these Clauses by the device of selling shares to the ultimate purchaser through an intermediary.

§ Mr. Millan
I am sure that all hon. Members will be very glad to accept the Amendment, which meets one of the objections previously raised to the Clause. We should congratulate the Government on seeing this point, even if only at this late stage.
What is particularly commendable in the drafting of the Amendment is the use of the rather general phrase in paragraph (a): effected in pursuance of arrangements for transferring control of the company". Having used language like this in the Amendment, might not the Government consider further using such language, not perhaps in this Bill, because there is hardly time now, but in future legislation? If we aim at absolute precision in these matters we end with an extremely complicated Bill which does not in the long run serve the purpose for which it was intended. It is right that legislation should use terms which are general but at the same time precise enough for the purposes for which the legislation is being passed. That is the 314 particularly satisfactory feature of the Amendment.

§ Mr. Barber
I beg to move, in page 20, line 42, at the end to add: (4) For the purposes aforesaid two or more persons aoting together to secure or exercise control of a company shall be treated in relation to that company as a single person. The Amendment introduces into the Clause a new subsection in order to secure that, if two or more persons act together to obtain control of a company within Clauses 20 or 21, with a view, for example, to making joint use of its trading stock, the provisions of those Clauses will apply to the sale of shares. The Committee will remember that in our previous deliberations the hon. and learned Member for Kettering (Mr. Mitchison) moved an Amendment designed to cover this very point, and I undertook to give it further consideration. We have done so, and the Amendment achieves the object which we had in mind.

§ Mr. Diamond
We are all grateful to the Government for once more accepting an Amendment originally moved by someone on this side. The only reason I rise is because on this occasion it was moved by one of my hon. Friends in particular, as the Economic Secretary said. The previous Amendment was designed to cover a point picked up by my hon. Friend the Member for Glasgow. Craigton (Mr. Millan), who was much too modest to claim any credit for it in the remarks he made a short time ago.
I want to dwell again on the same point. We apologise for having to persuade by irritation, but no method short of that seems to make any impact on the minds of Ministers. The Amendment says that: two or more persons acting together shall be treated … as a single person. That is an eminently satisfactory and desirable method of describing an association. In subsection (2) twenty lines are used, but there is no greater clarity or effectiveness than there is in this simple two-line Amendment.
I commend not only the Amendment, which the Government have moved because they accepted suggestions made from this side, but the use of these words. I hope that even at this late 315 stage it is possible for the mind of the Government to move even an inch or two per day to the point at which they will realise that the words which they will now have in several places in their own Bill are infinitely better than the words which they have said they must restrict themselves to in defining associated companies. Associated persons are persons who act together. Why are not associated companies companies which act together for the purposes of acquiring control? Why are the Government being so obscurely obstinate on a very simple point like this, unless they do not mean business?

§ Mr. Houghton
The Solicitor-General will have realised by now that there is no end to this; it just goes on and on. That is how it is likely to be. It is evident from the Amendment that we not only have to deal with the actions of an individual, but with avoidance conspiracies. The devices which people will get up to are beyond the fertile imagination of Inland Revenue officials who are constantly applying their thoughts to this matter.
I rise for two reasons. The first is to acknowledge, in the temporary absence of my hon. and learned Friend the Member for Kettering (Mr. Mitchison), the reference made by the Solicitor-General to the Amendment he moved in Committee. I thank the Government for having considered the point and moving this Amendment, which I am sure my hon. and learned Friend appreciates.
Secondly, it is very difficult on all these occasions to resist the temptation to make the general point about anti-avoidance and the tedium—one might say the penance—which we are going through in this Committee to frustrate the iniquities of the tax-avoiding fraternity. It makes one wonder more acutely as we proceed with the final stages of the Bill whether this is the way to do it.
7.30 p.m.
I shall not dwell on the point because it would be carrying the discussion too far. I have sat here for the last several hours and through the previous Committee proceedings and seen hon. Members and Ministers and their advisers 316 grappling with the complexities of this problem. We have just passed an Amendment which one has to read half a dozen times before one can thoroughly understand it. This is the type of legislation which we are presenting to the taxpayers at large. There is no doubt that all efforts will be made to circumvent what we are doing now. If we had referred to two persons in the Amendment that would not have been enough. We had to refer to two or more. That is typical of the way in which we are having to close the smaller loopholes ad infinitum after we think we have closed the big loopholes.
I am sure that after the Bill has been passed there will be reflections in many quarters on the adventure of a Finance Bill which makes a really determined attempt to stop anti-avoidance practices. I could well understand, although it is to be deprecated, all concerned throwing up their hands in despair and saying, "Let avoidance go on". We must soldier on. However difficult this legislation may be, I believe that finally the answer will come with a much bolder and much more drastic approach. Whether people like it or not, whether they object to omnibus legislation or not, whether they object to retrospection or not, we must do it the bold way or the whole system of taxation will continue to be in disrepute, and we shall see many people going about the country apparently able to throw parties at which they can afford to miss £4,000 pepper-pots. One wonders from where on earth they get the money. Are they property sharks, or Surtax payers paying 19s. 6d. in the £? From where do they get the money to lavish on their guests by the hundreds and thousands? That is what the people of Britain are asking.
This is part of the elaborate apparatus to stop these practices. I hope that our efforts this year will have greater success than those of the past, but do not let us be disappointed if next year Ministers get up at the Dispatch Box and say, "We are very sorry to say that in the last twelve months we have become wiser and sadder men".