§ Mr. Speaker
I imagine that it will also be convenient to discuss the Amendment in page 35, line 41 at the end to insert:or(c) in the case of a payment in respect of an office or employment in which the holder's service included foreign service, not being a payment of compensation for loss of office, that the foreign service comprised either—
- (i) in any case, three-quarters of the whole period of service down to the relevant date; or
- (ii) where the period of service down to the relevant date exceeded ten years, the whole of the last ten years; or
- (iii) where the period of service down to the relevant date exceeded twenty years, one-half of that period, including any ten of the last twenty years".
§ Sir E. Boyle
If you will allow, Mr. Speaker, perhaps we could also take the next two Amendments, in page 36, line 41 to leave out "and", and in line 42 after "office" to insert "and' foreign service'".
§ Sir E. Boyle
These Amendments give effect to the intention of an Amendment which was moved in Committee by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), that is, to extend the relief which is given on a voluntary payment, as distinct from a payment of compensation for loss of office, in cases where part of an employee's service has been outside the United Kingdom.
I indicated to the Committee when my hon. Friend raised the point that it was the Government's intention to accept the principle of my hon. Friend's Amendment, and these four Amendments give effect to what we said we would do.
§ Mr. Millan
I am very surprised and disappointed that the Government have made this further concession in these payments for compensation for loss of office, not even a payment for compensation for loss of office as defined by the appropriate Schedule. There is already a good deal in the Bill which provides concession to people who have been working overseas at some time or other. Clause 37 (2, a), for example, says that if at the relevant date, which is the date on which the event happens for which compensation is paid, the holder of an office or employment was domiciled outside the United Kingdom and was then employed by a company or firm also domiciled outside the United Kingdom, he is excluded from the provision for taxing compensation payments.
A second exclusion or concession is made in the Fourth Schedule in paragraph 6, in that in the calculation of the amount assessable for tax there is deducted proportionately the length of service which the holder of the office spends overseas, as compared with the total length of his service.
All of us have a great deal of sympathy with the person who serves over- 628 seas, because he has certain disadvantages, particularly if he loses his employment when he is serving overseas, as he probably has to come back to this country and has various settling-down expenses and so on. No one would wish to deal unsympathetically or ungenerously with people in that kind of position, but the provisions of the Clause exclude many of them and there are also the concessions made in paragraph 6 of the Fourth Schedule, so that there is already a good deal of relief for people of this kind. It seems unnecessary to have this further Amendment, particularly as expressed.
There are three categories of service which will allow people to be excluded. No one would seriously quarrel with the first, which covers people whose period of service down to the relevant date exceeds ten years, the whole of the last ten years' service having been spent abroad. We get on to doubtful ground with the second category and the third category is completely indefensible.
All that is required for the third category is that one-half of the period of service, including ten of the last twenty years of service, should have been spent overseas. It is possible for the last ten of the last twenty years to have been served overseas, but it is also possible for the first ten of that twenty years to have been spent overseas and the last ten in the United Kingdom. That is the theoretical position, and there must be many cases in which something approaching the last ten years' service will have been served in the United Kingdom.
In those circumstances it seems to me that there is no justice in treating the people concerned any differently from those who have carried out their service in the United Kingdom. Considering the concession already given in paragraph 6 of the Third Schedule, it seems completely unnecessary to make this provision, especially in regard to the third category.
I am very surprised that the Government have accepted the argument put forward by the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) in Committee. This is quite unjustifiable. We have already commented on the way in which the original intention of the Government to tax these compensation payments has been whittled down in one way or another, by excluding the first £5,000, and by introducing a standard 629 superannuation benefit. This is another concession, and I hope that my hon. Friends will press the Government on this point.
§ Mr. Diamond
I rise immediately to my hon. Friend's invitation to press the Government on this point, because they are on a bad point here. I take the view that there was no need for the Amendment—as did the Government, in the first place. It was only when the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) pressed the matter and put down an Amendment in Committee that the Government decided to give effect to it. Like my hon. Friend, I take the view that the Bill already provides quite a fair method of dealing with this matter, on the basis of the number of years served abroad. I want to underline the difference between subparagraphs (ii) and (iii) of paragraph (c). On sub-paragraph (ii), which one might be prepared to accept, the argument is that if the last ten years of the employment have been served abroad it is sufficient to say. "This man has been employed abroad," and to agree that if he receives a voluntary payment on retirement it is unfair and unjust to say that he should be liable for any kind of taxation on that payment.
But what happens in the case of subparagraph (iii)? The man could have served the last ten years of his twenty years' service in this country, in which case it would be natural to say that his service had been in this country. We do not go so far as to say that the whole amount should be treated for tax purposes, because there would be some proportion of relief in respect of the previous years served abroad, but if the ten years served abroad are to be definitive in themselves surely the same argument should apply here, and it is wrong to suggest that in a case where the last ten years are served in this country there should be a complete exclusion from taxation on the voluntary payment.
I hope the Government will agree to withdraw the third category of case; otherwise we cannot possibly regard them as being serious in dealing with this problem of the "golden handshake."
§ Sir H. d'Avigdor-Goldsmid
It would be improper if I were to rehearse the argument I used in proposing the Amendment in Committee, but I am a 630 little disappointed that the hon. Member for Gloucester (Mr. Diamond) and the hon. Member for Glasgow, Craigton (Mr. Millan) have lost that benevolence which they have shown throughout most of the stages of this Bill and should at this late stage express sentiments which are unfair to the people who will suffer if those sentiments prove infectious. The hon. Gentleman said that we had a good deal of sympathy for the class of people who benefit under this Bill. It seems a poor way of showing that sympathy if the hon. Gentleman is recommending the House to refuse an Amendment in their favour which the Government have admitted. I hope that the fact that it was I who proposed the Amendment will not be any bar to the Government sticking to it.
§ 12 m.
§ Sir E. Boyle
By leave of the House, I should like to reply to the point made by the hon. Member for Glasgow, Craigton (Mr. Millan) and the hon. Member for Gloucester (Mr. Diamond). In view of their speeches, I am a little surprised that they did not put down an Amendment—which would have been in order—to leave out paragraph (iii)—
§ Mr. Millan
We should have been glad to have done so, except for the question of time, which is something about which we have complained before. As has been pointed out, there are 129 Amendments on the Notice Paper and I should think it was a long time before most hon. Members got to this part of the Amendments.
§ Sir E. Boyle
I can assure the hon. Gentlemen that these three criteria set down in the Amendment to line 41 are not simply arbitrary and just thought up in connection with this Amendment to this Clause. Having decided on the principle that there should be total exemption in some cases, the criteria we have adopted—I think this was the best course we could pursue—are the same criteria as those, in practice, adopted in dealing with pensions paid to non-resident pensioners by United Kingdom employers or superannuation funds. That practice is set out in paragraph 220 of the Report of the Millard 631 Tucker Committee on the Tax Treatment of Provisions for Retirement.
As I say, these three criteria have some precedent behind them. While I understand that it is a matter for judgment, and one on which hon. Members may take differing views, about exactly what the criteria should be, I do not see how we could have done better than take those which are in practice adopted in dealing with pensions paid to non-resident pensioners by United Kingdom employers or superannuation funds.
§ Mr. Millan
Surely the point is that these are not payments to non-resident pensioners. The payments under this Amendment are those covered by Clause 36 and may often be payments to people in this country. The thing is entirely different.
§ Sir E. Boyle
I still think that having decided in principle that there should be some complete exemptions here, we went to what I feel to be a reasonable source in deciding what the criteria for these exemptions should be.
I cannot help feeling that the hon. Member for Craigton is making heavy weather of this. It seems to me beyond question that the principle behind these Amendments is right. I did not detect much disagreement earlier when my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) raised the point. I can see that there will be a difference of view about whether we have these Amendments right, or whether one criterion is too strict or too lax, but in general I am sure that the principle is right and I do not think that the Government will be doing any injustice to anybody if the House agrees to accept the Amendments as drafted.
§ Mr. Mitchison
I agree with my hon. Friends that the Amendments put down by the Government did not give the Opposition sufficient time. This is one of the later ones and, as we have heard, many of the previous ones are highly complicated. In those circumstances, I do not think it lies in the mouth of the Government spokesman to suggest that their Amendments might or should have been amended. They made it very difficult for us.
What troubles me in this matter is that there are already two exceptions 632 under this subsection. One is in relation to the holders of an office or employment domiciled elsewhere than in the United Kingdom, and the second one is in the case of the payment of compensation for loss of office. This is complimentary to the latter one, to paragraph (b). This is in respect of the office or employment but not payment for compensation for loss.
I cannot quite see why on questions of residence and the degree of foreignness—if I may put it that way—in an office or employment there should be this very remarkable distinction. Where it is a question of payment of compensation for loss of office the first condition is that the office or employment must be one which did not require work in the United Kingdom, or, if there was no express requirement as to the place of performance, that the holder did not perform any of his duties in the United Kingdom during the three years immediately preceding the relevant date. When we come to this other type of payment, an entirely different criterion is adopted.
I should have thought that these two payments, compensation for loss of office and payment in respect of the office or employment, were at any rate sufficiently close to call for some similarity between the conditions in which they were excepted and the conditions under which they were not. If we have totally different provisions we shall invite people to get round the provisions by making what is really compensation for loss of office into what is in form and apparently payment in respect of office or employment.
There is not that amount of difference between compensation for losing an office and a pension on its termination, and the two could easily blend into one another. I wonder if the hon. Gentleman, with the leave of the House, if the House gives it, could explain why he has used such different criteria in these cases. We all have a great deal of sympathy with this kind of case, but on the other hand, we feel that the "golden handshake" provisions as a whole were overdue and we regard with some critical attention any attempt to broaden the exceptions to these provisions.
§ Sir E. Boyle
I speak again by leave of the House. I regret that I cannot add very much to what I have said. I have 633 explained why we have adopted these particular criteria and whence we derive them. In our view, in considering the criteria that were desirable for this Amendment, we went to the best source we could. On that I realise that there is a difference of view in the House, but it is my belief that this Amendment—the principal one of this group—is justified on its merits. I cannot feel that we are seriously watering down the principle of the Clause by proposing this Amendment to the House.
§ Amendment agreed to.
Further Amendments made: In page 35, line 41, at end insert:
(c) in the case of a payment in respect of an office or employment in which the holder's service included foreign service, not being a payment of compensation for loss of office, that the foreign service comprised either—
§ In page 36, line 41, leave out "and".
§ In line 42, after "office'", insert "and' foreign service'".—[Sir E. Boyle.]