HC Deb 02 July 1962 vol 662 cc85-113

6.15 p.m.

Mr. Douglas Jay (Battersea, North)

I beg to move, in page 12, line 46, to leave out from the beginning to the end of line 3 on page 13.

The Chairman

With this Amendment may be discussed the next Amendment in the name of the right hon. Gentleman, in page 13, line 1, to leave out from "a" to the end of line 3 and to insert "commodities market".

Mr. Jay

We have tabled the Amendments because we are not convinced that the Government are justified in very largely excluding commodities from the chargeable assets which attract this short-term gains tax.

We are here dealing entirely with short-term gains on commodities made by individuals and not by trades or businesses. If such profits or gains are made in the course of trade or business, they are all, as I understand the Bill, dealt with anyway by the exclusion which appears in Clause 9 (1). We are, therefore, concerned with profits made out of dealings in commodities by individuals.

What the Government propose to do is to charge the tax only in the case of dealings on a futures market or dealings with or through a person already engaged in dealing with a futures market. That follows from the words in Clause 10 (2, a), which we are proposing in the first Amendment to omit. The first Amendment would, therefore, include in the charge for this tax all such dealings in commodities. The second Amendment, by a slight difference, would include only those where the dealings were on a recognised commodity market.

I suppose the Government wish to confine this tax to dealings connected with futures operations on the ground that those are in some sense speculative gains, whereas if the individual simply buys commodities and holds them perhaps in the hope of making a profit through a rise in the price, this is not to be regarded as speculation but is, in some sense apparent to the Chancellor of the Exchequer, morally distinguishable from a futures operation. I should like to hear what the Economic Secretary has to say to substantiate this. My hon. Friends and I are not convinced that there is any valid distinction.

If some individuals get together, though not in the course of regular trade or business, and form a consortium or if they just act as individuals and buy commodities with a view to making a profit, make a gain over a period, sell the commodities and receive the gain, surely that is a perfectly proper object for taxation, just as if they had done the same thing in the case of securities.

I think the Economic Secretary will remember the celebrated case in 1934 or 1935 when there was some very large-scale speculation in the City of London in pepper and shellac particularly and one or two other commodities. If my memory is correct, that was organised by individuals, and it ran to some very large figures and had some very lamentable consequences not merely for the people concerned but for a number of others engaged in business in the City. I should have thought that was speculation, and if one is to have a short-term gains tax, I do not see why the profits from that sort of thing should not be subject to the tax.

Suppose the commodities were bought not with the purpose of making a short-term gain but, for some other reason, and were held for a period—presumably it would be for less than six months—and were then sold and a gain was made. Even in that case I do not see why such a gain should not be a suitable object of tax.

I think that throughout the whole of this tax one has to ask oneself, "If we tax income, why should we not tax gains in some other form which are just as reputable as income, wages or salaries or most of the incomes that most of us earn, and are receipts which are open to the individual who receives them to spend?" Even if the gains are made in that way, in a perfectly bona fide operation with no speculative intent, I do not see why they should not be liable to tax in just the same sense as ordinary wages, salaries, fees or, indeed, investment income.

As I understand the Bill—the Econmic Secretary can tell me if I am wrong —we have now reached the following position. Under this tax provision, if a trade or business makes a short-term profit by buying or selling commodities, it will then be taxed anyway under Income Tax and Profits Tax. If an individual makes a short-term profit by buying stocks and shares on the Stock Exchange, then he will be taxed entirely without regard to whether there was a futures market, or whatever would correspond to that on the Stock Exchange. If an individual deals in commodities through a futures market, then he also will be taxed. But if an individual deals in commodities but not through such a market, then he will escape taxation.

That is what the Bill appears to us to say. If that is so, I cannot see the justification for the distinction. Unless the Economic Secretary can produce a much more valid reason than the Government have done hitherto, I feel that the case for the Amendment has been made.

Mr. Barber

It is very useful that these Amendments have been selected, because it gives me the opportunity of clearing up a point which frankly troubled me when I first saw the Clause in draft. I asked why the charge should be limited by reference to a futures market, and that is. I think, really the nub of the argument put forward by the right hon. Member for Battersea, North (Mr. Jay). But I think that when I have explained the reason for the existing wording, he and the Committee will be satisfied that it is right.

The first subsection excludes tangible moveable property generally from chargeable assets. The second subsec- tion, which the right hon. Member for Battersea, North wishes to amend, provides that tangible moveable property shall be chargeable in the case of, inter alia, commodities. in relation to any acquisition and disposal by a person dealing on a futures market or dealing with or through a person ordinarily engaged in dealing on a futures market. I cannot believe that the consequences of the first Amendment are what the right hon. Gentleman would wish. It would have the rather silly result of making a bag of flour bought from a grocer a chargeable asset. The right hon. Gentleman said that if commodities were bought and sold, even though they were not bought and sold with a view to making a profit, they should be subject to tax under Case VII, and I realise that what he has in mind is not the sort of case I have mentioned, that of the bag of flour, but the imposition of a charge on a person who deals with commodities in bulk otherwise than on a futures market.

Mr. Jay

Presumably a bag of flour would not be chargeable unless both bought and sold in the limited period.

Mr. Barber

That is certainly so, but there may be cases where quite small quantities of commodities are bought and sold, but are not bought originally with a view to speculation. I should have thought that it would have been quite ridiculous for those commodities to fall within the ambit of the charge.

It is quite unnecessary to bring the purchase and sale of commodities in bulk within the scope of Case VII because they are already dealt with under Case I of Schedule D. There is no difficulty, either in law or practice, about making a charge under Case I of Schedule D where the commodities are dealt in by a person who takes possession of them, because that person is clearly taxable under the existing law. I do not wish to weary the Committee with examples, but I can assure the right hon. Gentleman that it is wrong to say that a person of that kind would escape tax under the subsection as now drafted, because in any event he would be taxed under Case I of Schedule D.

There was a well-known case of a gentleman, I think that he was a moneylender, who bought a large quantity of paper in Berlin, an isolated transaction, and sold it at a profit. He was dealing in a commodity and it was held by the courts that he was taxable under Case I on the ground that it was an adventure in the nature of trade. This was not, to use the right hon. Gentleman's words, in the regular course of his business, but it resulted, nevertheless, in the gentleman concerned being liable to tax. I make that point because it is quite wrong to think that a person who buys and sells a commodity in bulk, even in an isolated case, can escape Income Tax, and Surtax if appropriate.

The second Amendment would substitute the words "commodities market" for "futures market", but, for reasons which I have already mentioned, a person who buys an actual consignment of, for instance, tea would already be liable to tax under Case I. Moreover, the Amendment is unsatisfactory in that its results would be that the charge would not apply to dealings in futures not carried out by the speculator directly on a futures market, but indirectly to a person engaged in dealing on such a market.

I have already explained that earlier, when the Bill was being considered in draft, I raised the issue of this paragraph. When the Amendments appeared, my right hon. and learned Friend the Attorney-General and I gave further consideration to them. If we had thought it right, we should not have hesitated to accept either one or both, or, as an alternative, to move a Government Amendment. But we are satisfied that the wording as it stands is satisfactory for the intention of both sides of the Committee. For those reasons and with that explanation, I hope that the right hon. Gentleman will not think it necessary to press the Amendment.

Mr. Jay

The Economic Secretary has been right to say that it was necessary to elucidate this point. He now tells us that if an individual engages in buying and selling commodities, he is then liable to tax under Case I of Schedule D. Is he quite sure that that is so, even though it is not in the way of trade or as a regular operation, but as a purely isolated operation by one individual? The hon. Gentleman has the advice of the Attorney-General to fortify him. If he is telling us that, I do not quite see the purpose of his previous argument about the bag of flour, because in that case, if an individual buys a bag of flour and sells it later and makes a profit, he would be liable to tax under Case I of Schedule D. If that so, why is it so wrong that we should propose an Amendment which would make such buying and selling of a bag of flour liable to tax? The hon. Gentleman ought to make it a little clearer so that we can be quite sure that the two halves of his argument do not move in opposite directions.

Mr. Barber

Under Case I of Schedule D, the question is whether an isolated transaction amounts to an adventure in the nature of trade. In the case of commodities which are dealt with in bulk, depending on the circumstances of the case, it is likely to be held to be an adventure in the nature of trade. On the other hand, if somebody buys a bag of flour and then decides that he does not want it and sells it, he is not trading or engaging in an adventure in the nature of trade. All this would depend on the circumstances of each case. All I am saying is that, in general, where the individual takes possession of the commodity in question, the Inland Revenue does not expect any difficulty in charging tax under Case I, but the difficulty which might arise is in the case where the person does not actually take possession but deals on a futures market. It is because of that difficulty—although it might not apply in many cases—that the Inland Revenue thought that the point should be covered as it is.

6.30 p.m.

Mr. J. T. Price

The Economic Secretary has made a very courteous and diligent reply, but he has not gone very far in convincing some of us who have given some thought to this matter. I remind him that the operation of a futures market is very intricate. Before 1954, there was a futures cotton market which operated in Liverpool. I was privileged to be a member of the Standing Committee which dealt with the Cotton Act of that year and by which the Government virtually abolished that futures market.

But there are other futures markets, for instance, in wheat and other primary products. I realise that in some circumstances a futures market is used as a hedge or insurance against certain contingencies which may arise in the course of business and in the buying of commodities for use in industry, and so on.

If it is claimed by Treasury Ministers that they will apply the capital gains tax to transactions on the futures market, it means, by implication, that they will also apply those advantages of debiting losses against gains in arriving at the taxable liability of a given firm or individual. If this is so, I warn the Committee that this will lead to other things. Clever people will realise that they are able to use the futures market and all the hedging operations that are part of the futures market in computing tax liability. They will do the vanishing trick, the Indian rope trick and other things towards which hon. Gentlemen opposite like to direct their energies to create a situation where calculated losses on a futures market are debited against gains which would otherwise be taxable.

Regardless of party politics, we often pass legislation which results in a civil servant having to sort out the position which arises in practice. If I were ruthless about this I would say, "Tell me, Mr. Economic Secretary, how your officials in the Treasury will apply this? For example, what records of transactions on the futures market exist which can be produced for taxation purposes?" If such records cannot be easily produced, we shall open the sluice gates through which a lot of dirty water will be released.

I am sceptical—I was going to say suspicious, but that is perhaps an unkind word—that if we bring this kind of arrangement into our tax procedures we will find that the futures market will be brought into all sorts of tax computations, and that the Inland Revenue will need more vinegar cloths than it has used so far, and this may be the beginning of a whole series of abuses which the House will have to correct.

Perhaps the right hon. and learned Gentleman the Attorney-General can say how this will be applied in practice to futures markets. How will the Inland Revenue compute liability on a capital gain on the futures market? If this cannot be done, it means that we will have on the Statute Book something which, in practice, means nothing, except perhaps a device which may be used to escape taxation. I therefore reaffirm our belief that this Amendment would serve a useful purpose, and I hope that it will not be dismissed lightly. I do not think that the Economic Secretary has discharged his liability to the Committee to prove that the Bill, as drafted, will stand up to the practical situation that will develop when the Bill becomes law.

Mr. Nabarro

I should like to ask my hon. Friend why the Treasury Ministers have decided not to endeavour in Clause 15 to define, first, a futures market, and, secondly, a commodity. I may be lacking in knowledge of earlier financial Statutes, but, so far as I am aware, in recent years no definition has appeared anywhere of what is a futures market. Further, I am not aware that any definition has ever appeared in a financial statute of what is the technical meaning, within the narrow financial and fiscal sense, of the word "commodity". The proper place for those two terms to be defined is at the end of Clause 15, but I can find no reference to them in that Clause.

In the context of this Amendment we have had a reference to cotton, to tea, and I am told that we ought to have had a reference to an antique, and perhaps we ought also to have had a reference to a motor car. I do not know what a commodity is. As commodities are referred to in Clause 10 and in the Amendment which we are discussing, we ought to be given a definition of a commodity. Further, as there is on page 13 a reference to futures market, we ought to have a definition of that as well, and these two definitions, given verbally now, should, at the appropriate time and place, be written into Clause 15.

Mr. Mitchison

For once, I have quite a lot of sympathy for the hon. Member for Kidderminster (Mr. Nabarro). For instance, if we consider motor cars, I wonder whether, if a motor car manufacturer gets seriously behind with his delivery of cars, orders to him are orders for a commodity on the futures market. I can hardly think that that is intended. It does not sound sensible, but I think that there are borderline cases, and that it would have been better to have attempted some sort of definition. It is a great advantage to have the right hon. and learned Attorney-General here because, ex officio, he carries the law in his head.

I was puzzled by the speech of the Economic Secretary. He said, first, that all dealings in commodities other than dealings in futures markets would be caught by Case I. Case I, however, simply says that it is in respect of trade carried on in the United Kingdom or elsewhere. We come back to the question raised by the beginning of this part of the Bill: is it, or is not, the profit of trade? That is the Case I answer, and I hear a still small voice say that it depends on the nature of trade.

The Attorney-General (Sir Reginald Manningham-Buller)

That charge extends not only to those carrying on trade, but to those who engage in an adventure in the nature of trade, even though it may be a completely isolated incident.

Mr. Nabarro

Both the hon. and learned Member for Kettering (Mr. Mitchison) and my right hon. and learned Friend the Attorney-General used the words "an adventure in the nature of trade". My hon. Friend the Economic Secretary said that it may be a single transaction by a private individual. If I buy a motor car for £500 next month with a view to reselling it at a later date at a profit, and I sell it at a profit for £600 one month later, surely that is an adventure in the nature of trade?

The Attorney-General indicated assent.

Mr. Nabarro

My right hon. and learned Friend is nodding. Is it, or is it not? If it is, I have done it scores of times. Am I about to be apprehended by the Inland Revenue and be charged for Income Tax and Surtax for the last seven years?

This is not hypothetical. It is a very serious matter. I want to know, first, whether the transaction which I have related is an adventure in the nature of trade, secondly, whether a motor car is a commodity, and, thirdly, whether I am dealing in a futures market?

Mr. Mitchison

I am most grateful to the hon. Member for Kidderminster for his intervention, because one thing which emerges quite clearly is that if he made any profits of this character he did not return them in his Income Tax return.

Mr. Nabarro

I did not.

Mr. Mitchison

I am sure that he will not mind saying so. It would not necessarily occur to me to return them in my Income Tax return.

I will not attempt to answer the hon. Gentleman's question, but it illustrates the real point of the Amendment. Later in his speech the Economic Secretary seemed to agree that it depended on the circumstances of the case. I am speaking purely from memory. I had not intended to intervene. If I remember rightly, the leading case in this respect was that of a man called Martin, who bought a large quantity of surplus linen shortly after the First World War. The case went to the House of Lords on the question Whether this was an adventure in the nature of a trade. It is a very difficult question, which will arise in all sorts of cases in connection with this part of the Bill.

If that is the point—and it was the only one raised—what is the harm in accepting the Amendment? Whatever definition we produce of "commodities", "futures market", and the rest, dealings in commodities on a futures market must also be dealings in commodities on a commodities market, that is to say, a commodities market would certainly include the specific case which the Government have in mind. It would also include all proper cases of dealings which were not in futures, and about which there might be some doubt and some quite innocent non-disclosure. I would not include dealings in motor cars by the hon. Member for Kidderminster or myself.

The Government are now to tax short-term gains in rubber plantation shares, for instance. I believe it to be a fact that some people, instead of speculating in rubber shares, speculate in rubber. They may do so in a futures market, but I suppose that cases will occur in which they take delivery of the rubber, hold it for a bit, and then ultimately sell it. From the point of view of the Government there is no distinction whatever between that kind of case and dealing in rubber shares. The only distinction is said to depend on the question whether or not the persons concerned are necessarily engaging in a trade by doing so.

I should have thought that there was quite enough doubt about the matter to warrant the Government's incorporating the wider phrase which the Amendment seeks to cover. It removes the element of uncertainty which was given us by the Economic Secretary's admission that it must depend on the circumstances whether it is a question of engaging in a trade. I am not trying to compete and to suggest cases where it might not be in the nature of a trade; if I did I should almost certainly make the wrong suggestions. But I would have thought—and this was borne out by the experience of my hon. Friend the Member for Sowerby (Mr. Houghton)—that there were doubtful cases in practice, where the element of doubt took the form of a taxpayer's quite innocently not returning what he should have done.

I cannot see any harm in accepting the Amendment. It would cover any sort of doubtful case. As I understand, the trade has to be in goods in some form or another, and it is apparently not an adventure in the nature of trade if a person buys futures and resells them. I am a little puzzled by the Government's saying that, and I should like to repeat what I said in order to make certain that I have it right. I was not sure whether the Economic Secretary heard what I said. Do the Government consider that the purchase of futures and the sale of futures afterwards is not a dealing in the nature of trade? That is to say, do the Government say, "If you buy the goods in practice and sell them, that is an adventure in the nature of a trade in the vast majority of cases, but if you buy futures and sell them that is not an adventure in the nature of a trade"?

Is there any foundation for a definition, or are the Government trying to cover a case in which there might be exceptional circumstances? My impression—which I give with diffidence, because I have not had an opportunity to look into the matter properly, and I have to rely on the intimate knowledge of the Attorney-General—is that no harm could be done by accepting the Amendment, and that we might include some doubtful cases which would otherwise fall between the provisions of the Bill, on the one hand, and the Case I cases of dealings in the nature of a trade, on the other.

I therefore suggest that the Government should consider what objection there is to accepting the Amendment. If they find that there is none I hope that they will accept it.

6.45 p.m.

Mr. Barber

First, I should like to deal with the last point raised by the hon. and learned Member for Kettering (Mr. Mitchison) and also by the hon. Member for Westhoughton (Mr. J. T. Price), namely, the question whether dealings in futures were or were not already within the tax net under Case I of Schedule D. It has already been clearly established by the courts that where a person frequently or habitually deals with commodity futures he is liable to tax. There is case law on this point. The difficulty which has arisen for the Inland Revenue authorities occurs where a person on only one occasion or only very occasionally deals on a futures market. In such cases the authorities have some difficulty in establishing liability.

The position of futures will be made clear by paragraph (a). Indeed, all that we have been seeking to do in that paragraph is to try to cover the sort of case in which the Inland Revenue has had difficulty, and which is not covered by existing law. I can only tell the hon. and learned Member that as a matter of law where the title to certain commodities passes to an individual and he then disposes of it there is no doubt that that he is liable to tax if he bought the commodity in bulk and it was in the nature of a trade. The difficulty arises in cases where he does not get a title to the goods but operates only occasionally on a futures market.

The hon. Member for Westhoughton was troubled about the question of losses. He thought that in some way somebody could engage in a racket by using these provisions in order to make losses deliberately——

Mr. J. T. Price

I am quite sure he could.

Mr. Barber

—on a futures market and set those losses off against other income. It may cause him to change his mind if I tell him that the Bill is so drawn that a Case WI loss can be set off only against a Case VII profit. I cannot see that there will be the opportunity which he envisages of setting off losses made deliberately—and I cannot understand why anybody should want to make a deliberate loss on a futures market. In any event, he certainly will not have an opportunity of setting off those losses against other sources of income.

Mr. J. T. Price

I am obliged to the hon. Member. I hope that his optimism is well founded, but there are some very ingenious people at large in the City of London and elsewhere who know the way round awkward corners. I should also like to know about the recording of transactions on a futures market. Is not the Minister aware that many futures markets operate on the basis of growing crops? If the period over which a capital gains tax can be levied is six months, the period of the levy may be shorter than the period of the market. How can we operate a capital gains tax limited to six months with a market that may operate for longer than six months?

Mr. Barber

That is a point which has not escaped the notice of the Chancellor of the Exchequer, but we came to the conclusion that as we were here dealing only with a very limited category of transactions, as I think is apparent from what I have been saying, it would not be worth while introducing a special code to deal with such transactions. We believe that this will catch the majority of transactions by way of dealing in a futures market which we wish to catch.

My hon. Friend the Member for Kidderminster (Mr. Nabarro) asked one or two questions about the purchase and sale of motor cars. Whether or not the purchase and sale of a motor car by an individual in any particular case gives rise to liability to tax under Case I must depend on all the circumstances of the particular case. I certainly would not presume to advise him. I can only say that if I were not standing at this Box and if he had done merely what he said he did I should be very happy to look after his interests and I hope that he would not have to bear any tax on the profit he might have made.

On the question of whether we should define "futures market" and "commodity," as my right hon. and learned Friend pointed out, those words will bear their ordinary meaning. It will be a question for the court to decide in any particular case whether the circumstances amount to a futures market or whether any particular item is a commodity, but I should have thought that in the general run of cases the court would have no difficulties.

Mr. Nabarro

I could not myself define a "futures market" and neither could I define the word "commodities," because they have different meanings in different applications in both cases. "Commodities" may or may not in a market sense connote raw materials. The word could in certain circumstances connote manufactured goods. I know that it does not generally connote manufactured goods, but the Inland Revenue has strange habits and might consider that "commodities" covered manufactured goods as well as raw materials. The hon. Member for Westhoughton (Mr. J. T. Price) came nearest to the truth when he referred to futures dealing mostly with growing crops. That is so and commodities are generally the derivatives of crops which have been grown, but not necessarily so.

I appeal to my hon. Friend the Economic Secretary when embarking on a venture of a new form of taxation for the first time in this country not to leave these grave points of dubiety about what is a commodity and what is a futures market. They both ought to be carefully defined. I quarrel at once with my right hon. and learned Friend the Attorney-General when he says that the ordinary accepted interpretation of the word "commodity" is good enough. It may be good enough for the layman but it should not be good enough for legislators in this Committee.

Mr. Barber

I hope my hon. Friend will agree that there is at least another point of view, that in view of the sort of difficulties which operate in his mind it might have been very difficult for us if we had attempted to define the word "commodities". I do not know if be has in mind that we should have listed various items of property, but if we had done that we should have been giving a definition which would be far too narrow. If we went further than that and tried to use a form of words to define "commodity", I think that we would have got into equal difficulties.

Mr. Nabarro

My hon. Friend is now making the whole position much worse. For example, is an antique a commodity?

Mr. Barber

I think it may well be, but it would be liable to tax under Case VII only in so far as this particular paragraph applies if it were dealt with on a futures market. This is what I have been saying all along. We are here dealing with a subsection which has a very limited application.

The hon. and learned Member for Kettering (Mr. Mitchison) quoted from the Income Tax Act, 1952, the words relating to a charge of Case I of Schedule D. I wish to make this clear, because I think some hon. Members may not quite have understood the significance of the words "adventure in the nature of trade". In Section 526 of that Act, "trade" is defined as including: every trade, manufacture, adventure or concern in the nature of trade.

Mr. Jay

Not a very good definition.

Mr. Barber

The right hon. Member says that it is not a very good definition, but it is one which has been used for many years and has been considered the whole basis of charge under Case I of Schedule D.

The hon. and learned Member asked why we do not propose to accept this Amendment. It is because in our view the sort of cases he had in mind are already covered as the law stands by Case I of Schedule D, and the Inland Revenue has considerable experience in these matters. It takes the view that purchase and sale of commodities in bulk where the title passes will not cause any difficulty in practice.

Mr. Mitchison

I have now found the Martin case. It was Martin and Lowry, 1927, appeal cases, which I am sure is even more well known to the Attorney-General than numerous other cases he remembers. It depended on a finding of fact by the Commissioners. It seems that there must be a finding of fact in these cases. To put it in non-legal language, it must depend on the circumstances of whether or not the transaction amounts to trade in the sense of the definition at the end of the 1952 Act. If that is the position, which seems tolerably clear not only from this case but from what the Economic Secretary said when he first spoke, what is the objection to covering the possible gap by accepting the Amendment? It would not interfere with the Government's intentions in any way and would cover only the exceptional cases which otherwise might be excluded.

The Attorney-General

I might be able to help the hon. and learned Member. Of course it is a question of fact whether a particular adventure is "an adventure in the nature of trade" or not. In the case he referred to there was not difficulty in coming to the conclusion. It was the only conclusion to which any tribunal could probably have come, that there was in fact an "adventure in the nature of trade". When we found, as in the case which my hon. Friend the Economic Secretary referred that a moneylender was suddenly buying a large quantity of paper in Berlin and selling it for a large profit in this country immediately after the First World War, there was only one conclusion possible, that it was "an adventure in the nature of trade".

I ask the Committee to bear in mind that if that be so it follows that one need not cover that ground again in relation to Case VII. One has to distinguish between an adventure in the nature of trade and the disposal by my hon. Friend the Member for Kidderminster (Mr. Nabarro) of his worn out motor cars at a profit. No one would seriously suggest that the disposal of cars for which he has no longer any use and which he bought for his own use, convenience, adornment and decoration, is an adventure in the nature of trade. It comes down to a small compass, that we are seeking to make sure that we cover the field for Case VII which otherwise might escape outside the net. The particular difficulty here is the dealings on a futures market. We think that there must be express provision for that. We do not think that any other express provision is required.

7.0 p.m.

When I am asked whether we should define "commodities" and "futures market", I would point out that in dealing with words in ordinary use in the ordinary English language we sometimes make the matter far more complicated and far more difficult to administer by seeking to define plain, ordinary English words. I am, therefore, reluctant to accept my hon. Friend's invitation to seek to define, for the purpose of this provision, "commodities" and "futures market". In interpreting whether the matter comes within the definition, the courts will have regard to the conjunction between the word "commodities" and the words "futures market".

From the moment that we saw the Amendment on the Notice Paper we gave considerable thought to the wording. I do not believe that there is any difference between the two sides of the Committee in what we want to achieve on this point, but in the light of the advice which we have received from the Inland Revenue and such consideration as we have given to it, we think that this is the best wording for this point and we think it wise to leave it where it is.

Mr. Jay

I should like to address a further question to the Economic Secretary or the Attorney-General, because the more often they speak the more puzzled I am about the Clause, Whatever other hon. Members feel. The Economic Secretary told us that if there were an isolated transaction by an individual it was already liable to tax provided that it was an adventure in the nature of trade even though it were an isolated transaction. If the hon. Member for Kidderminster (Mr. Nabarro) bought and then sold a motor car, a bag of flour, some cottton, or any of these things, and made a profit, if it were an adventure in the nature of trade this would be liable to tax even though he had never done it before and never did it again.

We inquired whether it was necessary to have these words about futures markets in the Bill. The Economic Secre- tary said that the trouble is that if people deal habitually on a futures market they are engaging in a trade and are liable to tax anyway, but, he said, supposing there were just as isolated operation on the futures market, the difficulty of the Inland Revenue was that that might not be liable to tax.

Why should that be true of an operation on the futures market and not of the individual transaction of the hon. Member for Kidderminster or anyone else? If that operation, though isolated, is liable to tax, surely the dealings on the futures market, which, to a layman, appear prima facie to be much more in the nature of trade, must also be liable. It does not seem to me, therefore, that the Economic Secretary has made out any case on the substantive point of our Amendment that it is necessary to have these words in the Bill specifically making operations on the futures market chargeable and other commodity operations not chargeable, and unless he can answer that question I feel that he has not made out his case against the Amendment.

Mr. Graham Page (Crosby)

With great respect to my right hon. and learned Friend, I feel that the longer this debate continues the more necessary it is to define not necessarily commodities but at least futures market and to distinguish it from the ordinary market. I can appreciate that commodities which are in being and which pass through hands in an ordinary transaction will then, if they are purchased in bulk and sold in bulk, eventually be an adventure in the nature of trade. If they are bought singly or sold singly they may or may not be, depending on the circumstances and the intentions of the dealer.

Is the distinction between this sort of transaction and those mentioned in the subsection as commodities being dealt with in a futures market the fact that the commodities are not in existence? Is that the real meaning of a futures market? My hon. Friend the Member for Kidderminster (Mr. Nabarro) tried to make a distinction between manufactured goods and raw materials, but surely that is not the distinction between a futures market and an ordinary market. Is it that the commodities are not in existence or is it that delivery of the commodities has not been received? A growing crop may be in existence, but when it is dealt with on a futures market, one does not actually receive delivery of the goods. Is that the distinction?

Whether the distinction is manual delivery or that the goods are not there at all, surely can be defined in the Clause. The importance of defining it is that if a person is dealing on the futures market regularly he will be taxed as if it were his normal trade. I understand that at the moment if he does one deal in it, he is not taxed at all. He will be taxed under the Clause, but he will be taxed on it being unearned income, whereas, of course, if it is trading in the futures market, it is taxed as being earned income. It is necessary to distinguish exactly what is caught under the Clause and what is caught under existing law as an adventure of trade.

Mr. J. T. Price

I must agree with what was said by the hon. Member for Crosby (Mr. Graham Page). Without taking too long about it, may I add that I cannot understand why the Attorney-General and the Economic Secretary are so squeamish about defining the terms relevant to the proposition which they are putting before the Committee. It is too easily assumed, as a matter of principle, that if the Bill is silent as to what is meant by a certain reference when it leaves the House, then perhaps when it comes to applying the legislation to the taxpayer a very clever and erudite official in the Ministry will be able to interpret it and to apply it with discretion and equity.

As a matter of principle, I deny that that should be the case. As a matter of justice between one citizen and another, I strongly object to any legislation of a controversial nature leaving the House—and this is controversial, although I am not dealing with the merits of it—in which the decision as to what is meant by the Clause which is to operated is left to the capricious discretion of some civil servant.

The right hon. and learned Gentleman says that the courts will construe it and will decide what is meant by the legislation. It is too frequently assumed in the House that all matters of dispute go to a court of law. The individual citizen is often in a specific situation with regard to legislation in which be cannot afford to exercise his legal remedy of having the question resolved by a learned judge. This assumption which runs through so many of our debates is that if the terms of the legislation are not defined, then a learned judge will make case law and it will all be in the books as a piece of jurisprudence on which future generations can rely.

But that is not in accordance with the facts of life. For every case which comes to a decision of a court of law there are 10,000 cases which are dealt with in a pragmatic hit-and-miss fashion, and ultimately the civil servant, the official, has to decide them. This is why we are always having arguments in the House that we should set up some kind of Ombudsman who could act as a judicial authority between the citizen and all these people in the Civil Service who are constantly oppressing him.

I think that many of the charges against the civil servants are exaggerated and unfair. But can we say that we are worthy of our name as legislators, on whichever side of the Committee we sit, when we deliberately let Cabinet Ministers and leading members of the administration say, "We do not like defining what this means. It is too difficult"? That is not good enough. When we are dealing with a word such as "commodity" in relation to taxation, we should be prepared to say what "commodity" means. If we do not know we must send for the editor of Webster's Dictionary, or the Oxford Dictionary, or a learned pedagogue who will tell us.

Mr. Callaghan

Or alter the wording.

Mr. Price

If anybody wanted "a futures market" defined, I should be very reluctant to offer a definition, except in a rough and ready way, but it would probably be a sensible definition. I would say "off the cuff" that if we are dealing with a futures market we are dealing with a man or a group of people operating a market in which they buy something which does not exist, with money they have not got, with no intention of ever taking delivery of the commodity they have contracted to buy. I do not see why we should not have a note of levity in this, because very often the satirical approach to some of these questions is best.

We are always running away from defining terms in Parliament. If I make a controversial speech in Standing Committee and am not very careful as to how I use the Queen's English, for which I have a great respect, an hon. Member opposite will immediately challenge me to define what I am talking about. I generally know what I am talking about. I hope that I convey it in robust English which is not unfairly exaggerated.

I put it to the learned Attorney-General, whom we are very glad to see with us this evening, that it will not do for a senior Minister of the Crown, and a Law Officer at that, to say at the Dispatch Box, "We do not like defining this because it is too difficult". He must try again. Unless he can make more sense of it, I suggest that the Committee should give us a run for the Amendment, because it would at least put some common sense into the Clause.

The Attorney-General

I listened with enjoyment to the speech of the hon. Member for Westhoughton (Mr. J. T. Price). I did not say that the Government would not put forward a definition because it would be too difficult. Listening to the hon. Member I began to wonder whether we ought not to attach a dictionary to each Finance Bill. We are often in danger of complicating our legislation by seeking to define unnecessarily words as to the meaning of which people have no serious doubt. I know that that is a very different approach from the approach of the hon. Member.

I am reluctant to put definitions in, unless the case for them is clearly made out. I do not think that the case is made out here. We are here considering dealings in commodities on a futures market. Those who have to apply the Measure will have no difficulty in dealing with that. It is not accurate to say that the decision will rest just with civil servants. That will not be so. The Inland Revenue may raise an assessment. It may be challenged. It will then come before the General Commissioners of Income Tax, an independent body. It may then go all the way up. I see no difficulties in the Clause operating in its present form.

I come to the substance of the matter, the point raised by the right hon. Mem- ber for Battersea, North (Mr. Jay). Here we are in a somewhat difficult field, because an isolated transaction in the nature of trade is taxed under Case I of Schedule D. Then the right hon. Gentleman asked about an isolated transaction in commodities on a futures market and teased my hon. Friend the Economic Secretary a little about his observations about a person who ordinarily engages in dealings in commodities on a futures market. When he ordinarily deals in such a way he is taxed, not under Case I of Schedule D, but under Case VI—and it is for the dealing, the carrying on of a business.

The gap which is left under the existing law and which we want to cover for the purposes of Case VII is where the carrying-on of dealings—a business —in commodities on a futures market cannot be established, where a person is carefully avoiding the possibility where he can be held to be engaged in trading, but is coming into the market just now and then to try to secure what is, in our view, a speculative gain which should be liable to tax. That is why we have put this special provision in subsection (2, a). In our view, that is all that is required.

Mr. Jay

The Attorney-General even now does not seem to make it clear why he thinks that an isolated transaction not on a futures market is already liable to tax, whereas an isolated transaction on a futures market is not now liable to tax.

The Attorney-General

As to an isolated transaction, an adventure in the nature of trade, I have a mass of case law on which I can rely. As to an isolated transaction on a futures market, which may be a very different thing from an adventure in the nature of trade, the Inland Revenue has not any authority at present. That is what we are seeking to get by this Measure.

I have done my best to make this clear to the Committee. I agree that it is a point of importance. I do not think that we shall gain any benefit from anyone's point of view by seeking to define the words in question. I think we can leave it to the Commissioners to express their view, applying the ordinary meaning of the English language to those words, read in conjunction with commodities on a futures market. We have spent a considerable time discussing the Amendment. I make no complaint of that. However, we have a great deal of other business to do and I cannot see that I can usefully add anything to what I have already said upon the Amendment.

7.15 p.m.

Mr. Frederick Gough (Horsham)

I must make my position clear. There is a very bad habit in which we all indulge—I more than many—of going through the Division Lobby without having the foggiest idea of what we are voting about. In this case I have been here from the word "go". I have heard every word said by the right hon. Member for Battersea, North (Mr. Jay) and by my hon. Friend the Economic Secretary. I have listened to two or three speeches from my right hon. and learned Friend the Attorney-General, but I have not got the foggiest idea of what all this is about.

From a purely practical point of view the hon. Member for Westhoughton (Mr. J. T. Price) suggested an Ombudsman. I should like an Ombudsman to go into a very small room with the right hon. Member for Battersea, North, my right hon. and learned Friend the Attorney-General and my hon. Friend the Economic Secretary, because this is the gravamen of the matter. The right hon. Member for Battersea, North made his speech. The opening remarks of my hon. Friend the Economic Secretary were, "I entirely agree. We all have the same idea. We all want to deal with the man who has a go in com-

modities instead of having a go on the Stock Exchange".

That puts the matter in simple words of one or two syllables. Then we got bogged down because my hon. Friend the Economic Secretary said that that was what he thought until he got hold of the draftsman. Once one gets hold of the draftsman one is sunk anyway.

Then we got into the position of having the words "a futures market". I have worked in the City of London for thirty years, but I do not know the definition of "a futures market". There are all sorts of complications. People deal in futures in tin, zinc, and babies at Lloyds. We issue policies against twins. That is a futures market.

Mr. Nabarro

Is a twin a commodity?

Mr. Gough

That is what I was coming to. The learned Attorney-General said that these were plain, ordinary English words. My wife uses plain, ordinary English words, but she does not say to me, "Would you like some commodities and bacon for supper?" Commodities cover a very wide field indeed.

To be serious for a minute, would my right hon. and learned Friend think again about this? I believe that both sides have the same object in view. At the moment it is so unclear that I have no intention of going into either Division Lobby.

Question put, That the words proposed to be left out stand part of the Clause:—

The Committee divided: Ayes 222, Noes 168.

Division No, 224.] AYES [7.20 p.m.
Agnew, Sir Peter Brown, Alan (Tottenham) Crowder, F. P.
Amery, Rt. Hon. Julian Browne, Percy (Torrington) Curran, Charles
Arbuthnot, John Buck, Antony Dance, James
Aihton, Sir Hubert Bullus, Wing Commander Eric d'Avigdor-Goldsmid, Sir Henry
Atkins, Humphrey Burden, F. A. Deedes, W. F.
Balniel, Lord Campbell, Sir David (Belfast, S.) de Ferranti, Basil
Barber, Anthony Carr, Compton (Barons Court) Digby, Simon Wingfield
Barlow, Sir John Carr, Robert (Mitcham) Donaldson, Cmdr. C. E. M.
Barter, John Cary, Sir Robert Drayson, G. B.
Baxter, Sir Beverley (Southgate) Chataway, Christopher du Cann, Edward
Beamish, Col. Sir Tufton Chichester-Clark, R. Duncan, Sir James
Bell, Ronald Clark, Henry (Antrim, N.) Eccles, Rt. Hon. Sir David
Bidgood, John C. Cleaver, Leonard Elliot, Capt. Walter (Carshalton)
Biffen, John Cole, Norman Emery, Peter
Biggs-Davison, John Collard, Richard Emmet, Hon. Mrs. Evelyn
Bishop, F. P. Cooper, A. E. Errington, Sir Eric
Black, Sir Cyril Cordeaux, Lt.-Col. J. K. Erroll, Rt. Hon. F. J.
Bossom, Clive Cordle, John Farey-Jones, F. W.
Bourne-Arton, A. Corfield, F. V. Farr, John
Bowen, Roderic (Cardigan) Coatain, A. P. Fell, Anthony
Boyle, Sir Edward Coulson, Michael Finlay, Graeme
Brewis, John Crawley, Aidan Forrest, George
Brooke, Rt. Hon. Henry Critchley, Julian Fraser, Ian (Plymouth, Sutton)
Gammans, Lady Longden, Gilbert Seymour, Leslie
Gardner, Edward Loveys, Walter H. Sharpies, Richard
Glover, Sir Douglas Lucas-Tooth, Sir Hugh Shaw, M.
Glyn, Dr. Alan (Clapham) McAdden, Sir Stephen Shepherd, William
Goodhart, Philip McLaren, Martin Skeet, T. H. H.
Goodhew, Victor Macleod, Rt. Hn. Iain (Enfield, W.) Smith, Dudley (Br'ntf'd & Chiswick)
Gower, Raymond McMaster, Stanley R. Smithers, Peter
Green, Alan Macpherson, Niall (Dumfries) Spearman, Sir Alexander
Gresham Cooke, R. Maddan, Martin Stevens, Geoffrey
Grimond, Rt. Hon. J. Maginnis, John E. Steward, Harold (Stockport, S.)
Grosvenor, Lt.-Col. R. G. Manningtiam-Buller, Rt. Hn. Sir R. Stoddart-Scott, Col. Sir Malcoim
Gurden, Harold Markham, Major Sir Frank Storey, Sir Samuel
Hamilton, Michael (Wellingborough) Marlowe, Anthony Studholme, Sir Henry
Harris, Frederic (Croydon, N.W.) Marshall, Douglas Summers, Sir Spencer
Harvey, Sir Arthur Vere (Macclesf'd) Marten, Nell Talbot John E
Harvey, John (Walthamstow, E.) Mathew, Robert (Honiton) Tapsell, Peter
Hastings, Stephen Matthews, Gordon (Meriden) Taylor, Edwin (Bolton, E.)
Hay, John Mawby, Ray Taylor, W, J. (Bradford, N.)
Heald, Rt. Hon. Sir Lionel Maxwell-Hyslop, R. J. Teeling, Sir William
Henderson, John (Cathcart) Maydon, Lt.-Cmdr, S. L. C. Thatcher Mrs. Marcgaret
Hendry, Forbes Mills, Stratton Thomas, Leslie (Canterbury)
Hicks Beach, Maj, W. Morgan, William Thompson, Richard (Croydon, S.)
Hiley, Joseph Nabarro, Gerald Thornton-Kemsley, Sir Colin
Hill, J. E. B. (S. Norfolk) Neave, Airey Touche, Rt. Hon. Sir Gordon
Hirst, Geoffrey Noble, Michael Turner, Colin
Hobson, Sir John Nugent, Rt. Hon. Sir Richard vane, W. M. F.
Hocking, Philip N. Oakshott, Sir Hendrie Vaughan-Morgan Rt. Hon. Sir John
Holland, Philip Orr, Capt. L. P. S. Vickers, Miss Joan
Hollingworth, John Osborn, John (Hallam) Wade, Donald
Hooson, H, E. Page, Graham (Crosby) Wakefield, Sir Wavell
Hopkins, Alan Page, John (Harrow, West) Walder, David
Hornby, R. P. Pearson, Frank (Clitheroe) Walker, Peter
Howard, Hon. C. R. (St. Ives) Percival, Ian Walker-Smith, Rt. Hon. Sir Derek
Hughes-Young, Michael Peyton, John Wall, Patrick
Hughes Hallett, Vice-Admiral John Pickthorn, Sir Kenneth Ward, Dame Irene
Hulbert, Sir Norman Pitman, Sir James Webster, David
Iremonger, T. L. Prior, J. M. L. Wells, John (Maidstone)
Irvine, Bryant Godman (Rye) Profumo, Rt. Hon. John Williams, Dudley (Exeter)
Jackson, John Proudfoot, Wilfred Williams, Paul (Sunderland, S.)
James, David Pym, Francis Wills, Sir Gerald (Bridgwater)
Jennings, J. C. Quennell, Miss J. M. Wilson, Geoffrey (Truro)
Johnson, Eric (Blaekley) Redmayne, Rt. Hon. Martin Wise, A. R.
Korans, Cdr. J. S. Rees, Hugh Wolrige-Gordon, Patrick
Kerby, Capt. Henry Renton, David Woodhouse, C. M.
Kirk, Peter Ridley, Hon. Nicholas Woodnutt, Mark
Lancaster, Col. C. G. Rippon, Geoffrey Woollam, John
Legge-Bourfce, Sir Harry Roberts, Sir Peter (Heeley) Worsley, Marcus
Lewis, Kenneth (Rutland) Robson Brown, Sir William
Linstead, Sir Hugh Rodgers, John (Sevenoaks)
Litchfield, Capt. John Roots, William TELLERS FOR THE AYES:
Lloyd,Rt.Hn.Geoffrcy(Sut'nC'dfield) Ropner, Col. Sir Leonard Mr. Gordon Campbell and
Lloyd, Rt. Hon. Selwyn (Wirral) St. Clair, M. Mr. Batsford
Longbottom, Charles Scott-Hopkins, James
NOES
Alnsley, William Delargy, Hugh Herbison, Miss Margaret
Allaun, Frank (Salford, E.) Diamond, John Hilton, A. V.
Allen, Scholefield (Crewe) Dodds, Norman Holman, Percy
Awbery, Stan Driberg, Tom Houghton, Douglas
Bacon, Miss Alice Dugdale, Rt. Hon. John Howell, Charles A. (Perry Barr)
Baxter, William (Stirlingshire, W.) Ede, Rt. Hon. C. Howell, Denis (Small Heath)
Bence, Cyril Edelman, Maurice Hughes, Emrys (S. Ayrshire)
Bennett, J. (Glasgow, Bridgeton) Edwards, Rt. Hon. Ness (Caerphilly) Hughes, Hector (Aberdeen, N.)
Benson, Sir George Edwards, Robert (Bilston) Hunter, A. E.
Blackburn, F. Edwards, Walter (Stepney) Hynd, H. (Accrington)
Boardman, H. Evans, Albert Hynd, John (Attercliffe)
Bowden, Rt. Hn.H.W.(Leics. S.W.) Fernyhough, E. Irvine, A. J. (Edge Hill)
Bowles, Frank Fitch, Alan Irving, Sydney (Dartford)
Boyden, James Fletcher, Eric Janner, Sir Barnett
Braddock, Mrs. E. M. Foot, Michael (Ebbw Vale) Jay, Rt. Hon. Douglas
Bray, J. W. Fraser, Thomas (Hamilton) Jeger, George
Broughton, Dr. A. D. D. Gaitskell, Rt. Hon. Hugh Johnson, Carol (Lewisham, S.)
Butler, Herbert (Hackney, C.) Galpern, Sir Myer Jones, Dan (Burnley)
Callaghan, James Ginsburg, David Jones, Elwyn (West Ham, S.)
Castle, Mrs. Barbara Gordon Walker, Rt. Hon. P. C. Jones, J. Idwal (Wrexham)
Chapman, Donald Greenwood, Anthony Jones, T. W. (Merioneth)
Cliffe, Michael Griffiths, W. (Exchange) Kelley, Richard
Collick, Percy Hale, Leslie (Oldham, W.) Key, Rt. Hon. C. W.
Corbet, Mrs. Freda Hall, Rt. Hn. Clenvil (Colne Valley) King, Dr. Horace
Craddock, George (Bradford, S.) Hamilton, William (West Fife) Lawson, George
Cronin, John Hannan, William Ledger, Ron
Crosland, Anthony Harper, Joseph Lever, L. M. (Ardwick)
Cullen, Mrs. Alice Hayman, F. H. Loughlin, Charles
Davies, G. Elfed (Rhondda, E.) Henderson, Rt.Hn.Arthur(RwlyRegis) Mabon, Dr. J. Dickson
McCann, John Paton, John Soskice, Rt. Hon. Sir Frank
MacColl, Jamn Pavitt, Laurence Spriggs, Leslie
McKay, John (Wallsend) Pearson, Arthur (Pontypridd) Stewart, Michael (Fulham)
Mackie, John (Enfield, East) Peart, Frederick Stones, William
McLeavy, Frank Pentland, Norman Taverne, D.
MacPherton, Malcolm (Stirling) Prentice, R. E. Taylor, Bernard (Mansfield)
Mallalleu, E. L. (Brigg) Price, J. T. (Westhoughton) Thompson, Dr. Alan (Dunfermline)
Manual, Archie Probert, Arthur Thornton, Ernest
Mapp, Charles Proctor, W. T. Tomney, Frank
Marsh, Richard Pursey, Cmdr. Harry Warbey, William
Muson, Roy Randall, Harry Wells, Percy (Faversham)
Mendeleon, J. J. Redhead, E. C. Wells, William (Walsall, N.)
Millan, Bruce Reid, William White Mrs. Eirene
Milne, Edward Roberts, Albert (Normanton) Wilkins, W. A.
Mitchim, G. R. Robertson, John (Paisley) Willey Frederick
Monslow, Walter Robinson, Kenneth (St. Pancras, N.) Williams D J (Neath)
Moody, A. S. Rodgere, W. T. (Stockton) Willams, LI (Abertillery)
Morris, John Rogers, G. H. R, (Kensington, N.) Williams, W. R. (Openshaw)
Moyle, Arthur Rots, William Williams, W. T. (Warrington)
Mulley, Frederick Royle, Charles (Salford, West) Wills, E. G. (Edinburgh, E.)
Neal, Harold Shinwell, Rt. Hon. E. Wilson, Rt. Hon. Harold (Huyton)
Noel-Baker, Francis (Swindon) Silverman, Julius (Aston) Winterbottom, R. E.
Noel-Baker,Rt.Hn.Philip(Derby,S.) Silverman, Sydney (Nelson) Woof, Robert
Oliver, G. H, Skefflington, Arthur Wyatt, Woodrow
Owen, Will Slater, Joseph (Sedgefield) Yates, Victor (Ladywood)
Paget, R. T. Small, William
Panned, Charles (Leeds, W.) Smith, Ellis (Stoke, S.)
Parker, John Sorensen, R. W. TELLERS FOR THE NOES:
Mr. Grey and Mr. Ifor Davies.

7.30 p.m.

The Attorney-General

I beg to move, in page 14, line 3, at the end to insert: (5) Subject to subsection (6) below, fixed plant or machinery which does not form part of a building or of a permanent or semi-permanent structure in the nature of a building, and which a person uses for the purposes only of a trade carried on by him, shall not be chargeable assets in relation to any acquisition or disposal of it by him; and this subsection shall apply in relation to the discharge of the functions of a public or local authority, and to the occupation of woodlands where the woodlands are managed by the occupier on a commercial basis and with a view to the realisation of profits, as it applies in relation to a trade. The Amendment arises out of a discussion we had in Committee when a point was raised about the position of fixed plant and machinery. On that occasion I said that I would further look into the matter. I think that the same point was also raised at that time by the hon. Member for Glasgow, Craigton (Mr. Millan).

The result of our consideration is that the Amendment has been tabled to make it clear that fixed plant and machinery is taken out. In view of the time we took in discussing the matter, I need not delay the Committee further because I think that the Amendment completely deals with the points raised by hon. Members, including the hon. Member for Craigton.

Amendment agreed to.

Mr. Barber

I beg to move, in page 14, line 6, at the end to insert: nor shall rights to acquire in the future patent rights as respects any invention in respect of which the patent has not yet been granted. The Amendment is little more than a drafting matter to deal with an oversight in the Bill as originally drafted. Clause 10 (5) deals with the question of patent rights and it excludes them from the scope of the charge under Case VII. The Amendment extends the exemption to cover rights to acquire future patent rights for inventions in respect of which patents have not yet been granted.

Patent rights are excluded under Case VII because the capital sums received on the sale of patent rights are already chargeable by virtue of a provision in the Income Tax Act, 1952. It would be inappropriate to leave a possible alternative charge under Case VII because the liability under the Section of the 1952 Act may be spread over a period of six years, which is obviously of advantage to the taxpayer. The Amendment is necessary because by virtue of paragraph 16 of the Sixth Schedule of the 1952 Act, amounts received for the sale of provisional applications for patent rights are deemed to be received for the sale of patent rights and are chargeable under the same Section as patent rights are charged. Clearly, the same exemption should be made in respect of Case VII as for patent rights themselves and that is the effect of the Amendment.

Amendment agreed to.

Further Amendment made: In page 14, line 7, leave out "Or (4)" and insert "(4) or (5)".—[The Attorney-General.]

Clause, as amended, ordered to stand part of the Bill.