- (a) a person furnishes to the Commissioners of Inland Revenue particulars of a transaction or transactions effected or to be effected by him being a transaction or transactions which but for the provisions of this section might fall to be dealt with under any of the provisions of sections twenty, twenty-one, twenty-two, twenty-three, twenty-four, or twenty-five of this Act; and
- (b) the Commissioners are satisfied that the transaction or transactions as described in the particulars were or will be such that they ought not to be dealt with under the provisions of any of those sections
§ Brought up, and read the First time.
§ 5.30 p m
§ Sir Cyril Black (Wimbledon)
I beg to move, That the Clause be read a Second time.
The point covered by this Clause is comparatively simple and straightforward. Whatever differences of opinion we may have about this year's Finance Bill, there will be no difference of opinion that Clauses 20 and 25, with which this new Clause seeks to deal, are extremely complicated and very largely incomprehensible to the layman. Indeed, many lawyers with whom I have discussed them have been unable to express definite opinions on matters of detail as to what they seek to achieve.
Many years ago, Mr. Gladstone laid down certain criteria regarding sound tax principles. I have not been able to trace his exact words, but I believe that one of his criteria was that taxes should be of a character that would make them easily intelligible to the taxpayer. If that be the case, we have certainly moved a very long way today now from the principles that operated in Mr. Gladstone's day. Any hon. Member who claimed to have a complete understanding of Clauses 20 to 25 would, indeed, be a very bold man.
The new Clause in no way challenges any of the proposals contained in Clauses 20 to 25. We may or may not agree with those Clauses, but their merits are in 497 no way affected by this new Clause, the purpose of which is to enable perplexed potential taxpayers, who are in doubt as to what Clauses 20 to 25 mean, to ascertain in advance from the Inland Revenue what would be the tax consequences of certain transactions.
There is a precedent in the present Finance Bill for that procedure, because in reference to Clause 26, we find in Clause 27 (9) words that very nearly accord with the words to be found in the new Clause. What I seek to do is to apply to Clauses 20 to 25 the procedure that is applied by Clause 27 (9) to Clause 26. That seems to be an eminently reasonable thing to do. There is a precedent for doing it, and I find it difficult to understand why the procedure should be regarded as relevant to Clause 26 but, apparently, not relevant to Clauses 20 to 25. Therefore, in the interests of clarification, I hope that my right hon. Friend may be able to advise the Committee to accept the new Clause.
§ Mr. Barber
As my hon. Friend the Member for Wimbledon (Sir C. Black) has said, the purpose of the new Clause is to provide that any person may furnish the Commissioners of Inland Revenue with particulars of transactions effected by or to be effected by him that might fall under any of the provisions in Clauses 20 to 25, with the object of obtaining a clearance. I am certainly the first person to admit to my hon. Friend that these are very complex Clauses, and I have a great deal of sympathy with the object he has in mind.
My hon. Friend has very skilfully drafted this Clause as a shortened version of the provisions about application for a clearance under Clause 27. I am sure that almost every hon. Member will now be familiar with the provisions of that Clause, but, in order to explain the position, I must, very briefly, state once again certain of the matters contained in it.
Clause 27 deals with transactions in securities giving rise to tax advantages and has effect—and these are the important words—unless the person concerned… shows that the transaction or transactions were carried out either for bona fide commercial reasons or in the ordinary course of making or managing investments, and that none 498 of them had as their main object, or one of their main objects, to enable tax advantages to be obtained, …In that context, provisions for a clearance by the Commissioners of Inland Revenue are clearly appropriate. I agree with my hon. Friend that Clause 20 also lends itself to provision for a clearance in so far as under subsection (2) of Clause 20 its operation turns upon the question of whether or not the Commissioners having jurisdiction in the matter are satisfied that after a sale of shares all trading stock belonging to the company at the time of the sale has been or will be disposed of in the normal course.
I should say that since Clause 20 (2) places the responsibility for deciding the matter on the Income Tax Commissioners, this new Clause would hardly be satisfactory taken on its own because, as Clause 20 is at present drafted, there is no room to give the Commissioners of Inland Revenue any power in the matter. I agree, however, that there is much to be said for the view that a person proposing to sell shares ought, if possible, to be able to ascertain where he stands before carrying out the sale.
It is with that in mind that there is a Government Amendment to Clause 20 which will be moved later, in combination with an earlier Government Amendment to the Clause, which will introduce the necessary machinery. This machinery will enable the intending vendor, together with the proposed purchaser of the shares, to approach the Commissioners to get a clearance if the Commissioners are satisfied that the trading stock will be disposed of in the ordinary course, as required by Clause 20 (2).
There are two points that are important. This provision for a clearance will also run for a sale of shares in a holding company which, under Clause 22, falls to be treated as a sale of shares under Clause 20 (1). It will also run in relation to a company that falls to be treated as within Clause 20 by reason of the special provisions of Clause 21, which, as my hon. Friend will remember, relate to a company which has put up, or is putting up, a building.
I hope my hon. Friend will agree that what I have said goes quite a long way towards dealing with the point that has, rightly, been concerning him, but I 499 should add that provisions for a clearance in relation to other provisions mentioned in the new Clause are—as I think that he will agree on reflection—not appropriate. Apart from the question whether or not trading stock will be disposed of in the ordinary way after a sale of shares, the application of the Clauses must depend upon whether, on the facts of the case and on the proper interpretation of the law, the taxpayer falls or does not fall within the provisions. In the event of dispute about any such question, it should be resolved in the ordinary way by appeal to the appropriate body of commissioners, just like any other dispute about a taxation matter.
I hope that what I have said about the Amendments which we propose to move later will convince my hon. Friend that we have done all we can to meet his point in providing for a clearance in cases where we consider it to be appropriate.
§ Question put and negatived.