Clause 25.—(PROVISIONS SUPPLEMENTAL TO SS. 22 TO 24.) (Hansard, 16 May 1963)

§ Mr. Graham Page
I want to refer to subsection (5). Under Clause 22 a premium is chargeable if the lease does not exceed a term of 50 years. If the lease is granted for more than 50 years, the premium is not chargeable to tax. If the lease is granted for a period of over 50 years with an option to the tenant to break at 14, 21, or any number of years within 50 years, under subsection (5) the lease is treated as of that length and term—14 years or 21 years, at which the tenant has the power to break. The landlord may have no power to break if the option is given only to the tenant. The landlord may be bound to a lease of 50 years or more. Having granted a lease of that length, he would not be chargeable to tax on any premium that he took. The Bill as it stands puts 1643 it in the hands of the tenant to decide whether the landlord is chargeable to tax.
I agree entirely that, if the lease can be broken at any period under 50 years by the landlord, it is right that it should be treated as a lease for that length of years up to the point when the landlord has an option to break to. I submit that when it is merely an option for the tenant to determine a lease and when the landlord, the person on whom the premium is charged to tax, is bound to allow the lease to run over the 50 years, it should be treated as a lease for a period exceeding 50 years, a lease the premium for which is not chargeable to tax.
Will my hon. Friend the Financial Secretary explain why in subsection 5(a) the words "or by the tenant" appear, with the result that, even though the lease may be for over 50 years and even though the landlord may be bound to let the lease run for over 50 years, it is treated for tax purposes as a lease for the period only up to the point when the tenant can exercise his option?

§ Mr. Bellenger
Is this a substantial point? Is it conceivable that a case like this could arise? For example, if a tenant has taken a lease over 50 years and has paid a substantial premium, surely he would not wish to do anything at 14 or 21 years or whatever period it may be, without trying to get some of his premium back. There might, on the face of it, be some justice in the hon. Member's contention, but I do not think that it is ever likely to arise.

§ Mr. Barber
Subsection (5) of the Clause contains provisions for determining, for the purposes of Clauses 22, 23 and 24, the length of the lease which may be cut short before it has run its full term.
I am sure that my hon. Friend the Member for Crosby (Mr. Graham Page), who is knowledgeable in property matters, will have appreciated immediately he saw these provisions that it was necessary to prevent an avoidance of tax on premiums under the formula set out in Clause 22(1) by dressing up a lease as one for a much longer period than that for which it is intended to run.
My hon. Friend referred in particular to subsection (5,a) which deals with the 1644 case where a lease can be determined by notice by either the landlord or the tenant, at which event it …shall not be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice. The point which my hon. Friend has put to the Committee is one which occurred to us but, so far, we have not found it possible to deal with it in the Clause in any way which would not leave this part of the Clause wide open to avoidance of tax.
In view of what my hon. Friend has said we will certainly have another look at the matter; but I must in all frankness tell the Committee that, from the efforts we have made so far, it is fairly unlikely that we shall be able to find a way to meet my hon. Friend's point.

§ Mr. Mitchison
I hope that no way out will be found. I have observed that on the Notice Paper is a not-selected Amendment to the Clause in the name of the hon. Member for Crosby (Mr. Graham Page)--in page 23, line 14. The speech of the hon. Member for Crosby would appear to bear a very close resemblance to that he would have made had that Amendment been selected. I suppose that that is one way of doing it. I find the hon. Member's proposal somewhat curious. I can understand treating a lease for a given term of years one way or the other—either for the maximum or minimum where there is an option to break —but I cannot understand the difference it makes whether it is the landlord who breaks the lease at the first possible opportunity or the tenant.
I should have thought that for the kind of purposes we are now considering there can be no difference. I agree with the Financial Secretary that we are considering a matter relating to the three foregoing Clauses. The last two of them, if not the three, are obvious anti-avoidance Clauses. It is difficult, in those circumstances, to allow an Amendment to make a change on the lines suggested in the remarks of the hon. Member for Crosby. I should have thought that in an anti-avoidance Clause it was particularly unfavourable, and I trust that the Government will stick to their guns in this matter.
8.45 p.m.
These anti-avoidance Clauses are few in number. I am not referring to them 1645 in particular, but one of them, apparently, has a fault in it which is to be corrected. I hope that two things will be done: firstly, that they are not in any way weakened, either by an Amendment of the Clause we are discussing, which refers to them, or by any Amendment made to the anti-avoidance Clauses at a later stage; and, secondly, I hope that the Chancellor of the Exchequer, if he gets another chance to introduce a Budget next year, will take this business of anti-avoidance a bit more seriously than the Bill appears to take it. We get up from the Opposition benches year after year and protest against the insufficiency of and-avoidance provisions, and the game seems to be at present that when the nefarious practice becomes sufficiently widespread the Government introduce a Clause to prevent it happening. It has that effect and the avoiders simply do it in another way.