§ The Solicitor-General
I beg to move, in page 71, line 14, to leave out from the beginning to the end of line 50 on page 75 and to insert:
§ DEDUCTIONS FROM RENTS AND OTHER RECEIPTS FROM LAND
§ Deductions from rents: general rules
- 1. The deductions which may be made from rent to which a person (hereinafter referred to as "the person chargeable") becomes en titled under a lease shall be such deductions of the amounts of payments made by him—
- (a) in respect of maintenance, repairs, insurance, or management;
- (b) in respect of any services provided by him otherwise than by way of maintenance or repairs, being services which he was obliged to provide but in respect of which he received no separate consideration;
- (c) in respect of rates or other charges on the occupier which the person chargeable was obliged to defray;
- (d) in respect of any rent, rentcharge, ground annual, feu duty or other periodical payment reserved in respect of, or charged on or issuing out of, land,
- 2. Subject to the provisions of this Schedule, from rent to which the person chargeable becomes entitled in a year of assessment there may be deducted the amount of any such payment as aforesaid which became due in the year of assessment or at an earlier time falling within the currency of the lease, in so far as the payment—
- (a) was made in respect of the premises comprised in the lease, and
- (b) in the case of a payment for maintenance or repairs, was incurred by reason of dilapidation attributable to a period falling within the currency of the lease or, in the case of any other payment, was incurred in respect of such a period:
- 3.—(1) In the case of a lease at a full rent, the foregoing paragraph shall apply as if references to the currency of the lease included any period (hereinafter referred to as "a previous qualifying period")—
- (a) during which the person chargeable was the landlord in relation to a previous lease of the premises, being a lease at a full rent, or
- (b) which was a void period beginning either with the termination of a previous such
1593 lease as aforesaid or with the acquisition by the person chargeable of the interest in the premises giving him the right to possession thereof,
- (2) Where during any period the conditions necessary for the period to be a previous qualifying period were fulfilled as respects part of the premises, but not the whole, the period shall be treated as a previous qualifying period as respects that part of the premises only, and the foregoing sub-paragraph shall apply accordingly, any necessary apportionment being made of rent, payments or other matters.
- (3) In this and the next following paragraph, "void period" means a period during which the person chargeable was not in occupation of the premises or any part thereof, but was entitled to possession thereof.
- 4. Subject to the provisions of this Schedule, in the case of a lease at a full rent, not being a tenant's repairing lease, there may also be deducted the amount of any payment made in respect of other premises by the person chargeable—
- (a) in so far as that amount could be deducted under paragraph 2 and 3 of this Schedule from rent to which he became entitled in the year of assessment under a lease of those other premises, being a lease at a full rent, or could be so deducted if that rent were not insufficient; or
- (b) if any part of the year of assessment is, in respect of those other premises, a void period beginning with the termination of a lease at a full rent, in so far as the amount could be deducted as aforesaid if the lease had continued until the end of that period.
- 5. Where by reason of any change of circumstances a lease ceases to be, or becomes, a tenant's repairing lease or ceases to be, or bcomes, a lease at a full rent, paragraphs 3 and 4 of this Schedule shall apply in relation to the lease as it subsists after the change of circumstances as if it were a new lease granted when the change occurred.
- 6. Where the person chargeable retains possession of a part of any premises and that part is used in common by persons respectively occupying other parts of the premises, the fore-going provisions of this Schedule shall apply as if a payment made in respect of the part used in common had been made in respect of those other parts.
§ Deductions from rents: land managed as one estate
§ 7.—(1) Where this paragraph applies to an estate for a year of assessment, the owner shall be treated—
- (a) in relation to a part of the estate which for any period in the year is not comprised in a lease under which he is the landlord, as if he were entitled under a lease of that part at a full rent (not being a tenant's repairing lease) to rent for the said period, becoming due from day to day, at a rate per annum equal to the annual value
1594 of that part ascertained in accordance with Schedule 7 to this Act; and
- (b) in relation to a part of the estate which for any period in the year is comprised in a lease under which he is the landlord, not being a lease at a full rent, as if the lease were at a full rent and the rent, so far as it relates to that part, were at a rate per annum not less than the annual value of that part ascertained in accordance with the said Schedule 7
- Provided that
- (i) a payment relating to premises comprised in the estate shall not be deductible from rent in respect of premises not so comprised;
- (ii) paragraph (a) above shall not apply to premises occupied by the owner wholly and exclusively for purposes connected with the management of the estate or for the purposes of a trade, profession of vocation
- (2) This paragraph shall apply to an estate if, at the end of the year 1962–63, the land then comprised therein was managed as one estate and the owner for the time being of the estate by notice in writing to the surveyor so elects, but such an election—
- (a) must be made within twelve months after the end of the first year of assessment for which the person making it became entitled to make it or such further time as the Commissioners of Inland Revenue may allow;
- (b) except in the case of the first election that can be made under this paragraph, shall not have effect unless the like election has had effect as respects the immediately preceding ownership;
- (c) shall apply in relation to the estate throughout the ownership of the person making it.
- (3) Where in any year of assessment the estate comprises premises not included in it at the end of the year 1962–63, sub-paragraph (1) of this paragraph (except the proviso) shall apply in relation to the year of assessment as if the premises were not included in the estate in the year:
- Provided that where at the end of the year 1962–63 the owner of the remainder of the estate, as then subsisting, was entitled under trusts arising under a settlement or on an intestacy, or was entitled (in Scotland) under a disposition by way of life rent and feu, to an interest such that, on the occurrence of some future event or events, he might become the owner of the said premises, this sub-paragraph shall not apply to the premises if at any time before the end of the year 1962–63 the premises and the remainder of the estate, as then subsisting, were together managed as one estate.
- (4) In this paragraph "estate" means land in one ownership managed as one estate.
§ Deductions from rents: premiums etc.
- 8.—(1) Where in relation to any premises—
- (a) tax has become chargeable under the provisions of section 22 (except subsection
1595 (5)), 23 or 24 of this Act on any amount (disregarding any reduction in that amount under this paragraph), or
- (b) tax would have become so chargeable on that amount but for the operation of section 22 (5) of this Act or this paragraph, or but for any exemption from tax,
- (a) tax has become chargeable under the provisions of section 22 (except subsection
- (2) Where a person would apart from this paragraph be so chargeable in respect of a lease or disposition which extends to a part only of the said premises, the amount on which he is so chargeable shall, where no claim is or can be made by him under section 22 (5) of this Act, be the excess (if any) of the later chargeable amount over so much of the appropriate fraction of the amount chargeable on the superior interest as, on a just apportionment is attributable to that part of the premises.
- (3) For the purposes of this and the following paragraph the appropriate fraction of the amount chargeable on the superior interest is the sum which bears to that amount the same proportion as the period in respect of which the later chargeable amount arose bears to the period in respect of which the amount chargeable on the superior interest arose, and for those purposes the period in respect of which an amount arose—
- (a) where it arose under section 22 of this Act, shall be the period treated in computing the amount as being the duration of the lease; or
- (b) where it arose under section 23 of this Act, shall be the period treated in computing the amount as being the duration of the lease remaining at the date of the assignment, or
- (c) where it arose under section 24 of this Act, shall be the period beginning with the sale and ending on the date fixed under the terms of the sale as the date of the re conveyance orgrant, or, if that date is not fixed, ending with the earliest date at which the reconveyance or grant could take place in accordance with the terms of the sale.
- 9.—(1) Where in relation to any premises tax has or would have become chargeable as mentioned in sub-paragraph (1) (a) or (b) of the foregoing paragraph in respect of a lease, estate or interest, then, subject to the provisions of the following sub-paragraph, the person for the time being entitled to the lease, estate or interest shall be treated for the purpose of deductions under the foregoing provisions of this Schedule from rent receiv-
1596 able by him in respect of those or other premises as paying rent for those premises (in addition to any actual rent), becoming due from day to day, during any part of the period in respect of which the amount chargeable on the superior interest arose for which he was entitled to the lease, estate or interst, and in all bearing to that amount the same proportion as that part of the period bears to the whole.
- (2) Where the foregoing paragraph has effect in relation to a lease granted out of, or disposition of, the lease, estate or interest in respect of which tax has or would have become so chargeable, sub-paragraph (1) above shall apply for the period in respect of which the later chargeable amount arose only if the appropriate fraction of the amount chargeable on the superior interest exceeds the later chargeable amount, and shall then apply as if the amount chargeable on the superior interest were reduced in the proportion which the said excess bears to the said appropriate fraction:
- Provided that where the lease so granted, or the said disposition, extends to a part only of the premises, sub-paragraph (1) above and this sub-paragraph shall be applied separately in relation to that part and to the remainder of the premises, but as if for any reference to the amount chargeable on the superior interest there were substituted a reference to that amount proportionately adjusted.
§ Deductions from rents: payments made before 1964–65.
- 11.—(1) Except as provided by this and the following paragraph, no payment shall be deductible under the foregoing provisions of this Schedule if made before the beginning of the year 1964–65.
- (2) If the cost to the owner of any premises of maintenance, repairs, insurance and management during the five years ending with the
1597 1597 year 1963–64 exceeded the relief available to him in respect of those five years, the excess shall be treated for the purposes of the foregoing previsions of this Schedule as if it were a payment in relation to the premises made by him in the year 1964–65 in respect of dilapidation attributable to that year:
- Provided that there shall be disregarded for the purposes of this sub-paragraph—
- (a) any payment made during a period when the owner was in occupation of the premises, and any relief so far as it was available to him in respect of such a period;
- (b) any payment in respect of which a deduction may be made by virtue of paragraph 12 of this Schedule;
- (c)any payment for works falling within section 101 (2) of the Act of 1952 (by virtue of which "maintenance" includes the replacement of farm buildings etc.), being a payment made after the end of the five years which, under section 101 (7) of that Act, we retreated as the five years preceding the year 1963–64, or would have been so treated if a claim under section 101 of that Act could have, and had, been made for that year,
§ I suggest that it would be for the convenience of the House if with this Amendment we deal with the Amendments in page 76, line 37, page 78, line 19, page 78, line 45, page 79, line 4, page 79, line 13, and in page 79, line 17. All these Amendments arise from the main Amendment, which is a recasting of Schedule 4.
§ Schedule 4 contains in its present form a system of allowing expenses as a deduction in arriving at the amount of taxable protfis. It specifies what expenses are allowable in arriving at assessments under the new Case VIII of Schedule D on rents and other income from real property. It comes into operation in 1964–65 when rents are assessable under Case VIII of Schedule D instead of under Schedule A. It is a complex, though very important, Schedule, on which there was certain discussion in Committee.
§ It provided, as the whole of this reorganisation does, a new ground of tax law. Obviously in this new field we sought the comments and advice of all members of the Committee and also of professional bodies whose concern and interest are particularly in this field. The Schedule has now been recast in the light of the advice we have received. We invited suggestions, and were indeed very grateful for them. Moreover, important points of substance were raised by professional bodies and by hon. Members on both sides, especially by my hon. Friends the Members for Nottingham, South (Mr. W. Clark), Crosby (Mr. Graham Page) and Aldershot (Sir E. Errington). We have met, if not all the points they raised in Committee, certainly the most important of them. I am grateful to them and to other hon. Members for the assistance they gave.
§ The Amendment in page 71, line 14, recasts the provisions in Schedule 4 which set out the deductions allowable against rents under leases of land. It also alters other parts of the Schedule consequential on the main Amendment. In its present form, if the Amendment is accepted, it produces far greater clarity and coherence.
§ The alterations are as follow. First, it recasts the provisions with regard to 1599 relief for maintenance expenditure incurred before 1964–65. This is in response particularly to points made by my hon. Friends the Members for Nottingham, South, Crosby and Aldershot. Now the expanses for all relevant periods are taken into account and the landlord is not now faced with the choice of leaving out of account either past expenses or future expenses up to the year 1967–68.
§ Secondly, the provisions with regard to the set-off of losses on one property against the rents of another are simplified, again as the result of the comments made in Committee. Now, all rents are pooled, unless, first, they are not full rents—that is to say, rents which, taking one year with another, cover the cost to the landlord of his obligations and his expenses of maintenance, repairs and management; if they are not full rents, the letting cannot be regarded as a business transaction—or, secondly, substantially the whole responsibility for the repairs rests not with the landlord but with the tenant. If it rests with the tenant, the rent is effectively investment income which does not qualify for the set-off of expenses on other property. The restriction of rights of set-off to "lessor's repairing leases" is abolished. The third main alteration is that the allowable expenses are set out more clearly. The provisions for relief for the landlord who lets a building in flats, for his expenses in maintaining the common parts or part of the building and providing the services for which a charge is included in the rent, are set out.
§ 3.45 a.m.
§ The fourth point is that relief is not now lost, as it was under the original Schedule 4, where payment is due in a qualifying period because the work has been done during such a period and is not made until after the property has ceased to qualify; for example, where it was occupied by the owner before the bill was paid. Under the old Schedule the relief was lost. That has been changed by paragraph (2) of the new Schedule.
§ Paragraph (7) of the new Schedule covers the owner of a mansion house who, perhaps, has high expenses of upkeep; 1600 a property which is part of an estate, of which the other parts are let. This matter was dealt with earner. In such a case the owner is able to opt to have his expenses incurred on the first property set against rents received from other properties, provided he brings the full current annual value of the property on to the other side of the account. This, too, meets representations made to us by professional bodies and some of my hon. Friends.
§ Regarding deductions for rents, the general rules are set out, firstly for maintenance and repairs, secondly for services, thirdly for tenants' rates and, fourthly, for head rents. While that represents the contents of paragraph (1), paragraph (2) sets out the deductions due from rents during the lease for dilapidations whether or not there is a full rent.
§ Paragraph (3) is designed to show that where there is a full rent, the expenses can be carried forward from previous leases of the same premises at a full rent under the same landlord and also to cover void periods; that is, there is continuity while the premises are either let or kept for letting at the full rent. Paragraph (4) points out that if it is a full rent and not a tenant's repairing lease, there may be set against it expenses on other properties also let at the full rent. Paragraph (5) sets out that if, during the lease, any material change in the repairing obligations or rent payable took place, that is treated as a new lease.
§ The second half of the new Schedule, beginning with paragraph (7), provides the mansion house relief. This was dealt with earlier. Paragraph (8) deals with deductions from rent in respect of premiums. This matter was also dealt with earlier. Paragraph (9) concerns another premium case. If a premium for a sublease arises there is the appropriate fraction to which I referred when dealing with the second of the new Schedules. Paragraph (10) deals with Clause 22 and improvements.
§ I have given a skeleton recital, considering the hour of the morning, of the new Schedule. As I said in Committee, it is a complex matter. It shows more clearly what are the deductions and how they can be made. This can never be a simple matter or something which is easily understood. Nevertheless, the pro- 1601 visions will be in a better form if the House accepts the new Schedule.
§ If this Amendment is accepted, the Amendments that we are discussing with it become consequential in carrying out those principles. I shall, of course, be happy, with the leave of the House, to assist the House further if hon. Members have any questions to ask.
§ Mr. Jay
I agree with my hon. Friend that the Solicitor-General's speeches are somewhat clearer than the Schedules as they appear here. Nevertheless, I am still a little puzzled by the transaction in which we are now engaged. Under the Bill as it stands, we have Schedule 4 which relates, of course, to the deductions that the taxpayer could make from rents and other receipts from land for the purpose of computing his liability under the new charge of Case VIII. That part of the Schedule took up most of page 71, and all of pages 72, 73, 74 and 75 of the Bill—that is to say, about five pages. We are now asked to leave out all those pages and to substitute for their contents an entirely new form of words extending over a rather greater space.
If one attempts to compare—as, I am sure, all hon. Members opposite, including the hon. Members for Nottingham, South (Mr. W. Clark) and for Halifax (Mr. Maurice Macmillan) have done most carefully—the original Schedule and the form of words now before us, one is inclined at first sight to think that the Government are merely saying more or less the same thing in rather different though, one hopes, rather clearer words than before.
It immediately leaps to one's view that that is not entirely so in the case of paragraph 11 of the Amendment, which relates to payments made before 1964–65. Here, evidently, a major change of substance has been made. Do I understand from the Solicitor-General that we are not merely clarifying and restating and tidying up, but also making a number of changes in the substance and, indeed, the policy of the new tax? If that is so, it is a little surprising, and one would like to know just how matters have reached this stage.
It is, after all, now perhaps fifteen months since the previous Chancellor announced that he would abolish Schedule A. Therefore, he and his staff, 1602 and the Inland Revenue, had this unusually prolonged period to think the matter over. They then produced this Bill. I agree that it is a major undertaking, but the Government themselves embarked on it. They produced it in April with this Schedule which presumably, they had been framing for a year or more. Now, without a great deal of notice, we are presented with an entirely new—what the hon. and learned Gentleman called recast, but what I should have called entirely rewritten, Schedule of great complexity containing not only a number of clarifications but matters of substance.
I realise that criticisms of the Schedule were made in Committee and that the Government have quite rightly taken them into account, but what we want to be clear about is that we are confronted here, not merely with the rewriting of the Schedule, but a number of changes in the method by which these deductions will be allowed. Perhaps we can have a little more light on how it came about that this part of the Bill has had to be entirely rewritten, although, presumably, when they introduced the Measure the Government had had at least a year in which to work out those proposals.
§ Sir Hugh Lucas-Tooth (Hendon, South)
I am sure the whole House will wish to thank the Government for the improvements in this Schedule, both as to substance and clarity, and to thank the Solicitor-General for the clear way he explained it to us. I should like to raise a matter of some importance to my constituents. Hitherto, local authorities have been charged Income Tax in respect of excess rental income for their council house estates under Case VI of Schedule D. They have also been charged under the same case of Schedule D in respect of other activities, such as the provision of amenities—tennis courts, football and cricket pitches, bathing pools, bowling greens and things of that kind.
In the ordinary way, it has been possible for local authorities to make a profit on their housing estates, and it has not been uncommon for them to make a loss in respect of these other activities. Under the present dispensation, when both these kinds of activity are charged under the same case, it has been possible for local authorities to set off their losses against their profits. That 1603 was decided before the special Commissioners in a case in which Orpington Urban District Council was concerned in October 1959. I understand that that decision was opposed by the Government, but for four years they have done nothing about it and that has been the law.
Let it be admitted that this position seems to have been the result of something of an accident. I think that it was due to the wartime arrest of Schedule A assessments. That made it necessary to deal with these surplus rental profits, and I imagine that they were put into Case VI because it was a convenient place to put them rather than for any other reason.
I certainly do not wish to argue that the present state of affairs can be justified on strict logic. I admit frankly that the amenities which are provided by councils are not in any way usually confined to the tenants of their housing properties. They are usually available to all the ratepayers and are a quite separate kind of undertaking. I certainly would not be prepared to argue, as the Opposition have argued and voted yesterday, against all taxation of local authorities in respect of their housing estates.
The point that I want to make is that the change brought about by transferring the charge in respect of council estates from Case VI to the new Case VIII has been sudden, arbitrary and unfair. It is right that I should give the figures in respect of my own local authority. In Hendon the taxable surplus on the housing revenue account for the year 1960–61 was over £86,000, making an Income Tax assessment of £33,000. In 1961–62 it had risen to £88,000, and the estimated profit for the year 1962–63 is over £90,000, making a liability to tax of more than £34,000.
These are very large figures indeed, and the result of this Schedule, even as amended, appears to me to be to take away from Hendon Borough Council something of the order of £40,000 a year, without any sort of compensation, and, indeed, without any sort of warning at all. The council has pursued a perfectly consistent policy. It has financed these amenities out of this surplus income. That was entirely proper and entirely beneficial.
1604 The Government may, of course, argue that in doing this the council was, in fact, receiving something in the nature of a concealed subsidy from the Exchequer in respect of this very considerable income, and that if we are to make grants in this connection they ought not to be done in this way. I think that that may very well be so, but it seems to be even more undesirable to allow local authorities to act over a considerable number of years on the basis that the law is as it is and then, suddenly, to change the law, to cut off this source of revenue and to give no compensation of any kind.
In a sense, what is being done now has something in the nature of a retrospective effect. Hendon—and I have no doubt many other local authorities—has entered into commitments and spent capital on the basis that it is going to be able to finance the matter as it has hitherto been able to do out of its surplus housing revenue account. It will no longer be able to do that, and this will inflict a very heavy loss upon it.
I am not objecting to this change of policy being made on principle. It may well be that it is right that this should be done at the present time, but what I do ask my hon. and learned Friend or some other member of the Government to say is that it cannot be right suddenly to turn off this tap and to throw this very heavy burden on particular local authorities, and that something should be done in order to temper the wind to the shorn lamb so as, so to speak, to tail off the position in view of these heavy commitments and large sums of money involved.
§ Mr. Graham Page
Despite the hour, I do not feel that I can let the occasion pass without thanking my hon. and learned Friend the Solicitor-General and my hon. Friend the Financial Secretary for listening so patiently to our points originally made in Committee and later on the Schedules, as they were originally drawn, and for meeting the major points. Despite the point on which my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) put his finger, the major points which were worrying us in Committee, as the Schedule originally stood, have been met.
One of the rather difficult provisions which were originally in and which did 1605 not seem to benefit anyone was that about carrying on under the old scheme for the next four or rive years. That has gone. Secondly, it is quite clear that one can set off the loss on one property against the gains on another in one year if those properties are both let at the full rent. Thirdly, I think it is clear that one can carry forward a loss from one year to the next provided it is on the same category of property, the properties being let at a full rent.
The fourth point, and the one which will affect more people than the others I have mentioned under paragraph 11, is that what we have called the unexpended balance of relief, that is, the relief which had not been disposed of in the average of the past five years, will now be payable in the year 1964–65 together with the actual cost in that year. That will be a reasonable way in which to treat the taxpayer from whose money tax has already been taken. It is not a concession or a bonus. It is paying back money to which he is entitled. In the year 1964–65 there will be that relief paid to him as well as a claim for his actual expenses.
I am grateful that the amended Schedule deals with those four points. In addition, may I thank my right hon. and learned Friend the Solicitor-General for so clearly explaining to us these five pages of type which, however well we may be able to read them in the light of day, would otherwise be difficult to understand at this hour of the morning. He has certainly made them clear to us.
§ Mr. Houghton
There is a matter of procedure when we are confronted with a rewrite of a substantial portion of a Bill that has already passed through the Committee stage. It would have been more helpful if, in some different type or in some annotation, we could have been shown what are the new points in this very lengthy Amendment.
When the House is asked to do work twice over—first to go through the Schedule, and a very lengthy Schedule, too, in its original form, and then is presented with an Amendment which says "leave out from the beginning" and seeks to delete the next four pages and to substitute something which is about twice as long, it is a bit thick. This is not the local glee club. This is the House of Commons—what my hon. Friend the 1606 Member for Leeds, West (Mr. C. Pannell) described as the highest forum in the land. Here we are dealing with business in a way which would be a disgrace to the smallest branch of the Inland Revenue Staff Federation. I think this is one of the matters which should be considered by the appropriate body on procedure.
But although we have been very badly treated, can we have an assurance that the taxpayer will be better treated? Can we have an assurance that there will be a nice glossy attractive-looking paperback published, entitled "Case VIII for Tiny Tots"?—for that is what will be needed. How taxpayers are going to cope, I do not know. How the Inland Revenue is going to cope, I do not know either. But in one way or another, I suppose, it has got to be done.
But then we heard a few moments ago from the hon. Member for Hendon, South (Sir H. Lucas-Tooth) that something had happened which was quite a shock to the Borough of Hendon. This noble and wealthy borough, in which the Parliamentary Labour Party benevolent fund has recently invested £1,000, was described by the hon. Gentleman as a shorn lamb. A shorn lamb is not a very good investment even for the Parliamentary Labour Party benevolent fund.
The truth is that some hon. Members did not realise what they were asking for when they asked for the abolition of Schedule A. They thought that it would be a nice neat job, costing the Chancellor £50 million, to relieve the owner-occupier of this burdensome tax on his notional income which was an abomination, and it was astonishing that it has lasted so long. But it was obvious that, in the doing of it, something had to be done with the rest of the shambles of Schedule A, the excess rents provisions, all the problems connected with leaseholds, tenanted properties, considerations of various kinds, premiums, and the rest. In fact, of course, under the old system many people were getting away with paying tax on far less than they should because of the basis of assessment of tenanted properties under Schedule A. Now, all that has been converted into this new case under Schedule D, with a new and more realistic basis of assessment. That is one of the by-products of the change.
1607 I do not think that the Inland Revenue welcomed, when they heard of it for the first time, the idea of embarking on this enormous enterprise; but, at least, a much cleaner job has been made of it as a by-product of the abolition of Schedule A on owner-occupiers. There will be many difficulties. As I said earlier, a good deal of tidying-up will be necessary as time goes on.
It is really disturbing that we have to do our business in this way, hoping and believing that it is all right. Unless one reads this through very carefully, one cannot be sure that the Chancellor has not abolished the Monarchy in one of the paragraphs, unbeknown to the House of Commons, and the Queen's realm. What is hidden in it, goodness knows, unless it is all shown to us clearly. The right hon. and learned Solicitor-General has gone through it with care, but he has not covered the lot. We have to take it on trust. It is a great pity that the House of Commons, a legislative body, has to take anything on trust. It is a great reflection on our methods of doing business that we can spend long hours dealing with a lengthy Schedule in the Bill and then have it ripped out and a fresh set of pages stuck in. That is what it amounts to.
I sincerely hope that, before very long, there will be a radical overhaul of the conditions in which the House does its business. The present situation is nothing short of disgraceful. If people realised the conditions and circumstances in which we did our work, they would tremble for the wisdom and the accuracy of our legislation. They might even accuse us of being party to a grand conspiracy to keep the legal profession fully occupied.
We put on the Statute Book new Clauses, Schedules and Acts of Parliament ill-digested. We had two hours' discussion earlier of what an Amendment meant and few of us are realty satisfied with it, even though it is now to be written into the Bill.
I have no doubt that hon. Members are beginning to think about their breakfast and I will not detain the House any longer, but when we are kept up as late 1608 as this we might as well make a night of it and do it properly. There are some things that can be said at a quarter past four in the morning that would not be tolerable at a quarter past four in the afternoon. [Interruption.] The hon. Member for Nottingham, South (Mr. W. Clark) is getting a little excited. He has had tributes paid to him. He and his hon. Friend the Member for Crosby (Mr. Graham Page) have shaped the Bill and made it better. They have been the main source of inspiration for much that is on the Order Paper this evening. So the hon. Member should be content to have this new fame thrust upon him from the Front Bench opposite, although he will, I trust, bear with me for one moment longer.
I am sure that this new Schedule will do its job. I hope that it does. When the Inland Revenue has to translate it into intelligible guidance for taxpayers under Case VIII, I sincerely hope that hon. Members on both sides may be supplied with a free copy so that we can then discover for the first time what we are doing now.
§ The Solicitor-General
I should certainly like to reply to two of the points which have been raised. At one time during the speech of the hon. Member for Sowerby (Mr. Houghton), I saw the shadow of impeachment over my head by thinking that I had misled the House of Commons and that somewhere tucked into Schedule 4 was such an awful consequence of the abolition of the monarchy. I assure the hon. Member that that is not hidden away anywhere in any of the paragraphs.
§ The Solicitor-General
With regard to the shorn lamb of Hendon, already the cold winds of Sowerby have been blasted in that direction and I can provide no comfort. My hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) was right, however, in saying that excess rents were put into Case VI in 1940, at a time when Schedule A valuations could not be raised by being revalued. The effect was that excess rents were available to set against losses on other Case VI transactions. If there had been a revaluation, of course, that would have 1609 disappeared. I can only say to my hon. Friend that I appreciate the point he has made so fully and strongly this morning on behalf of Hendon, but there is nothing that I can hold out to him in any word of comfort.
§ Sir H. Lucas-Tooth
It is only because of the admirable administration of the borough I represent that this is impossible in Hendon.
§ The Solicitor-General
I am sure that that is the true reason for such a successful period in financial operation, which, unfortunately, appears to be coming to an end.
This is, as the right hon. Member for Battersea, North (Mr. Jay) and the hon. Member for Sowerby appreciate, a major change, one of the greatest changes that have been made in the Inland Revenue law for a great many years. I do not think that on reflection anyone would criticise the fact that this is something in which the opinion, the comment and the experience of all Members of the Committee were sought and that when they were provided they were taken into account. I well appreciate the points made by the hon. Gentleman about procedure and about printing, and they, I am sure, will be noted. I am sorry it produced in the end such an unmanageable and indigestible meal for the House, but I have no doubt that the work of the Committee was extremely valuable, and I should like to repeat my gratitude to all hon. Members in the Committee for what they did in getting what I am sure is a very much better Schedule 4.
§ Amendment agreed to.
§ Mr. Barber
I beg to move, in page 76, line 8, to leave out from "person" to "as" in line 9.
It would be convenient to take the next two Amendments at the same time. The three Amendments merely apply to deductions from sums within the ambit of paragraph 11 of this Schedule the same principle as the House has already agreed should be applied to rental income.
§ Amendment agreed to.1610
§ Further Amendments made: In page 76, line 15, leave out "in or before the year."
§ In line 19, leave out "in or before the year".—[Mr. Barber.]
§ Mr. Barber
I beg to move, in page 76, to leave out lines 28 and 29 and to insert:12. No payment shall be deductible under the foregoing paragraph if made before the beginning of the year 1964–65:Provided that this paragraph shall not prevent the deduction of a payment in so far as a loss in respect of the payment is by virtue of section 346 of the Act of 1952 (relief in respect of losses under Case VI of Schedule D) carried forward to that year, and where the deduction falls to be made it shall be made notwithstanding anything in subsection (3) of that section (which requires relief to be given as far as possible from the first subsequent Case VI assessment), and to the extent that it is made relief shall not be given under that section.This Amendment corrects an anomaly in the transitional provisions, and again, in so far as they apply to sums in respect of rents payable under reliefs, the Amendment corresponds to that already accepted by the House in respect of rents in the new paragraph 12 of this Schedule and contained in the Amendment the House agreed to just now. I will happily explain this Amendment in detail if the House wishes, but as I have just said, the same principle has already been accepted.
§ Amendment agreed to.
Further Amendments made: In page 76, line 37, leave out from "paragraph" to "lease" in line 40 and insert:
4 of this Schedule as a deduction which by virtue of paragraph 2 thereof might have been made by him from rent to which he was entitled for that year under a lease of the land, being a".—[Mr. du Cann.]
In page 77, line 14, leave out from "in" to the end of line 16 and insert:
relation to the premises preserved or protected by the embankment of an amount equal to a twenty-first part of the expenditure and incurred in respect of dilapidation attributable to the year".—[The Solicitor-General.]
§ Mr. du Cann
I beg to move, in page 77, line 42, to leave out from the beginning to "shall" in line 1 on page 78 and to insert:(3) In relation to expenditure in respect of which an allowance under section 94(l)(c) of the Act of 1952 would, but for the provisions of this Act, have fallen to be made in respect of the premises for the year 1964–65, the foregoing provisions of this paragraph shall apply as if the expenditure had been incurred in the year of assessment following that in 1611 which it was actually incurred and, so far as the expenditure was incurred in repairing the embankment in question, shall apply as if it had been incurred in making it, but those provisions.This Amendment corrects a flaw in the drafting of paragraph 13 of the Schedule which deals with the question of sea walls. It is a very simple matter. We are grateful to the professional body which brought it to our attention, but I am sure that the hon. Member for Sowerby (Mr. Houghton) will be delighted to hear that I am informed that the Inland Revenue had seen it even before that early date.
§ Amendment agreed to.
§ Mr. Barber
I beg to move, in page 78, line 15, to leave out from the beginning to the end of line 17 and to insect:in respect of which an allowance has been made under Part X or Part XI of the Act of 1952".This merely corrects a mistake in drafting.
§ Amendment agreed to.
Further Amendment made: In page 78, line 19, leave out from "paragraph" to "deducted" in line 23 and insert:
where a sum or part of a sum deductible under the foregoing provisions of this Schedule can be deducted for the year of assessment in which the sum is paid it shall be so deducted, and where it cannot it shall be deducted for the earliest year of assessment for which it can be".—[Mr. Barber.]
§ Mr. du Cann
I beg to move, in page 78, line 37, to leave out from "amount" to second "or" in line 39 and to insert:on the profits or gains arising from which the first-mentioned person would be chargeable under Case VIII".This corrects an error in drafting.
§ Mr. Mitchison
I merely rise to inquire whether the Inland Revenue is divided into two parts—those who commit and those who detect the errors in Bills.
§ Mr. du Cann
With the leave of the House, I should inform the hon. and learned Member for Kettering (Mr. Mitchison) and the House that to some extent they are one and the same person.
§ Amendment agreed to.
Further Amendments made: In page 78, line 45, at end insert:
(5) Where, on account of a payment made in any year of assessment, a deduction falls
to be made under this Schedule from any rents or receipts to which the person making the payment became entitled in a previous year, all such adjustments of liability to tax shall be made, by repayment or otherwise, as may be necessary to give effect to the deduction.
§ In page 79, line 4, leave out from beginning to end of line 12.
In line 13, leave out "and". In line 17, at end insert:
and 'tenant's repairing lease' means a lease where the lessee is under an obligation to maintain and repair the whole, or substantially the whole, of the premises comprised in the lease".—[The Solicitor-General.]