Clause 23.—(CHARGE ON ASSIGNMENT OF LEASE GRANTED AT UNDERVALUE.) (Hansard, 26 June 1963)

§ Mr. Graham Page
I beg to move, in page 22, line 20, after "where" to insert: after the beginning of the year 1963–64". Clause 23 creates quite a new liability to tax. It is a tax upon a fictional, notional, or suspended premium, whatever one wishes to call it, if the property is let at less than a rack rent and without demanding a premium at the time of the let, or demanding what the tax authorities may think is an insufficient premium. There is a sort of floating about in the air of an unborn taxable premium, referred to in the Clause as "the amount foregone", which hangs in the air, as it were, from the back of an Inland Revenue stork.
Incidentally, "amount foregone" must surely mean the amount gone before. Should not the word be spelt "forgone", meaning what one has gone without? Perhaps is it a foregone premium in that it has gone before. If it is, I should not call it unborn, as much as a ghost floating in the air waiting to be seized upon by the tax authorities.
Let me, however, stick to my simile of an unborn taxable premium, because 1465 it is born when the lease is assigned if, on that assignment, a premium is paid. Not only that, it becomes born again with new taxable premium on another assignment. The mother and father, or the forebears of all this, are the lease which was granted—and I underline "was"—for fifty years, but the transaction on which the Clause really takes effect is the assignment.
Does the Clause apply to the assignment of the lease, the lease having been granted before 4th April, 1963? I have sought by this Amendment to make quite certain that it refers only to leases granted after that date. I am quite aware that Clause 25(6) states …nothing in the three foregoing sections"— which I would therefore understand to mean the Sections we are doing without, as the word is spelt in the same way as in the expression, "the amount foregone": shall apply in relation to a lease granted…before"— 4th April, 1963. But the substance of Cause 23 is the assignment, and not the grant of the lease.
Further, the Clause speaks about a lease that was granted some time in the past. Does that provision apply to a forgone lease as it applies to a forgone amount? I confess that I think that the draftsman's sense of timing is no better than his sense of spelling in this case, and my Amendment is an endeavour to make it a foregone conclusion that the Clause applies only to leases granted after April, 1963.

§ The Solicitor-General
I hope that my hon. Friend the Member for Crosby (Mr. Graham Page) will not think me discourteous if I say that I got a little confused in the similes, the "gone" and the "ghosts", but I do not share his doubts, which are more ghostly than real, concerning the effect of Clause 25(6). He is perfectly right that Clause 23 imposes a charge on the amount paid on the assignment of a lease, of 50 years or less, originally granted at an under-value. The illustration which I have used before is that of the freeholder who grants a lease to his wife for £10 and the wife assigns the lease for £10,000. By Clause 23 she pays on £9,990.
The Amendment seeks to interpose words which carry the implication that the 1466 terms subject to which the given lease is granted may be different after the start of 1963–64 from what they were before, but such a lease surely must have been granted once and for all. If the intention of the insertion of the words is to prevent the Clause from applying to assignments made on or after 1963–64 of leases that are granted before 1963–64 I suggest to the House that Clause 25(6) sets out in unequivocal terms the object which is required to be achieved. I appreciate what my hon. Friend has said both about spelling and drafting but I suggest that the position is covered by Clause 25(6) and that some of his doubts are more ghostly than real.

§ Mr. Graham Page
On that assurance, I beg to ask leave to withdraw the Amendment.

§ Mr. Graham Page
I beg to move, in page 22, line 41, to leave out subsection (2) and to insert: (2) Any grantor, assignor, or assignee of a lease to which subsection (1) of this section applies may forward to the surveyor for his consideration a statement of the facts and circumstances relating to such a lease and such further information, if any, as he may think fit, and may request the surveyor to give a certificate as to whether or not a charge to tax arises or may arise under this section, and if so, the amount on which the charge arises, or may arise, whereupon the surveyor may—
(a) call upon the grantor assignor or assignee as the case may be to furnish him within twenty-eight days or such extended period as he may subsequently allow such further particulars as he may reasonably require:

Provided that if the particulars so required are not furnished to the surveyor within the period or extended period allowed for the purpose he may proceed under this section upon the information before him, or

(b) within a reasonable time after examination by him of such statements object to any statement or any part thereof and in that case shall state in writing the cause of his objection according to the best of his knowledge and information;

(c) grant such a certificate subject to such terms or conditions as he may think fit.
(3) Any person who is aggrieved by the decision of the surveyor on any question arising under subsection (2) of this section may by notice in writing to that effect given to the surveyor within three months from the date on which notice of the decision is given to him make an application to have his claim for relief heard and determined by the Special Commissioners. This is an Amendment of more substance perhaps than the previous one. By 1467 subsection (2) the Clause provides a clearance procedure. Indeed that must be very necessary, because this tax is to arise out of conditions in the past—conditions when a lease was granted. If a premium is obtained on the assignment of that lease it may be due to the fact that the lessor has foregone a premium at the time when he granted the lease. On the other hand, it may be due to the enhanced value of the property, by reason of general inflation or of local betterment or of a definite improvement to the property itself. It may be that the premium on assignment has had nothing to do with the fact that the premium had been foregone at the time the lease was granted. Clearance procedure, therefore, is very necessary, and if it is necessary it should be fair and reasonable but as it stands in the Bill it is very strangely expressed.
The applicant, according to Clause 23(2), has to say whether or not a charge arises and on what amount it arises. He has to set out to the inspector how he, the taxpayer, thinks the tax arises and how much may be payable. One must remember that this is based on the amount forgone, which must have been an estimate of an amount at the time the lease was granted.

§ Mr. Houghton
The taxpayer surely will be in possession of the information. To the extent that it can be ascertained he is the most likely person to know what it is.

§ Mr. Page
Indeed. If the hon. Gentleman will look at my Amendment he will see that that is exactly what the taxpayer would do; he would put before the inspector a statement of the facts and circumstances". That appears in the second line of my substituted subsection (2). Having put those facts before the inspector—who is called the "surveyor" in proper language—he will request the surveyor to give the certificate. The surveyor will then be entitled to call upon the applicant to provide further facts if he thinks necessary. But that is very different from requiring the taxpayer to assess the tax himself, to put the amount before the surveyor and then for the surveyor to do nothing about it.
As subsection (2) stands at the moment, the surveyor need do nothing about it.
1468 He can receive this information, If he rejects it, and is courteous, he will, of course, say that he does reject it, but he is under no obligation in subsection (2) to give any reasons for the rejection. I imagine that he will be very careful not to give those reasons because the Act will not require him to give them. I submit that the subsection (2) which I desire to substitute for that in the Bill is a far more usual form of obtaining a clearance certificate.
In my Amendment the applicant provides a statement of the facts and circumstances". He requests the surveyor to give a certificate as to whether or not a charge to tax arises…and if so, the amount… The surveyor may well call for more facts, and, having got all the facts that he thinks necessary, will state his reasons and grant or refuse a certificate.
Furthermore, I have added in my Amendment something which is not in the Bill—the right of appeal to the Special Commissioners against that certificate in order to reach finality in the matter. That gives a straightforward reasonable procedure for the taxpayer to obtain a clearance certificate. I do not think that can be said of subsection (2) of Clause 23 which leaves the whole matter in the air after the taxpayer has gone to the trouble of getting valuations, estimates and so on of this amount forgone, worked out what he thinks is the tax, applied for a certificate, and then nothing more may happen. I am sure that my rather more spelt-out procedure is more fair on the taxpayer.

§ The Solicitor-General
My hon. Friend the Member for Crosby (Mr. Graham Page) says that to spell out what the surveyor or inspector should do would be of greater assistance, but I must advise the House that I do not think that is so.
As my hon. Friend has pointed out, Clause 23 provides that if there is submitted to the inspector or surveyor by the grantor or assignor, or even the assignee, a statement showing whether or not a charge to tax arises or may arise, and if the inspector is satisfied as to the accuracy of the statement, he shall so certify.
1469 My hon. Friend has stated that the Amendment provides for a statement in much greater detail and provides also for an appeal. I suggest that what he has put forward is not appropriate. The grounds of the inspector's objection may derive from the tax liabilities of a person who has not authorised disclosure—for instance, a former assignee of the lease. It would be contrary to the principle of confidentiality to oblige the inspector to make a statement of his grounds, when he may have obtained those grounds for acting as he has done from knowledge or information of the tax liabilities of some person who has not permitted the disclosure.
Secondly, the appeal procedure suggested is not altogether appropriate. Clause 23 is designed to determine the tax liability, not the accuracy of the person's statement as to his tax liability. Here again, the problem of confidentiality would arise, making matters very difficult for the Special Commissioners. I suggest, therefore, that the words my hon. Friend proposes are not appropriate.
There are no objections when liabilities under Clause 23 are under ordinary appeal because, as my hon. Friend said, the onus is on the taxpayer to show that the Clause 23 assessment is wrong or that he is entitled to reliefs, and the information would come from him. The proposals now in the Bill leave it to the inspectors to do their best, as of course they will; and they should not, I suggest, be bound inflexibly as my hon. Friends spelt-out provisions would require. I hope that he will not press his Amendment.