HC Deb 04 June 1964 vol 695 cc1319-45
Mr. William Clark (Nottingham, South)

I beg to move, Amendment No. 90, in page 14, line 12, to leave out from "listed" to "is" and to insert in subsection (4) hereof". I do not think that I need detain the Committee for very long. We have all read the Bill with great interest. The Amendment will make it more logical than it is at the moment, because it will be seen that what is referred to in subsection (1,a) is not found in this subsection, but in subsection (4).

The Solicitor-General (Sir Peter Rawlinson)

My hon. Friend is clearly right. This is a drafting error, and the Amendment sets the matter to rights.

With the agreement of my hon. Friend, and that of the Committee, I was propossing to turn to the intricacies of Clause 16, which is only the first of three intricate Clauses. I had intended to refer to the details of that in moving the next Amendment, and if that is agreeable to my hon. Friend and to the Committee, I merely say to him that we are grateful for his having pointed out this drafting error, and I advise the Committee to accept the Amendment.

Amendment agreed to.

The Solicitor-General

I beg to move Amendment No. 50, in page 14, line 18, at the end to insert: or, before, at or after that time, the lessor's interest in the lease, or any other interest in the asset, has belonged to a person associated with the person who made the payment, and that person so associated with the person who made the payment has obtained a capital sum in respect of that interest". I think that it might be convenient to the Committee to discuss with that Amendment, Amendments Nos. 51 and 52, and the Amendments to Schedule 7, Nos. 73 to 83, and 85. They are consequential Amendments should the Committee accept the Amendment which I have just moved.

The Chairman

If that is convenient to the Committee, so be it.

The Solicitor-General

It may be of convenience to the Committee to go through a little of what is the effect of the Clause, and indeed, to relate it to Clauses 17 and 18 to show the importance of the Amendment.

These Clauses deal with the avoidance devices based upon the leasing of trade premises, plant and machinery, and other business assets. The avoidance can take a number of different forms. The remedy is directed against a practice which, on the evidence, is as yet in its infancy.

Leasing is a normal financial arrangement, and is certainly in no way objectionable. There are many cogent reasons for it in business. The objection arises where the terms of the lease are so arranged that substantial tax benefits are produced, in particular by a bunched-up rent at first and a negligible rent thereafter.

Let me give an example. Let us take the case of an asset or a piece of machinery worth £1,000, for which a rent of £400 a year is charged for three years—making a total of £1,200—and, thereafter, a rent of £1 a year for another term of years. The epitome of the Clause, which the Amendment seeks to perfect, is the case where a person creates a capital sum which is not taxable by making deductions which attract some form of tax relief. The Clause deals with cases where plant and machinery or other assets are leased for use in a trade or other income-producing activity, and where payments under the lease qualify for tax relief in one of the ways set out in subsection (4).

I will give another example. Let us say that a trader leases machinery of the value of £1,000 for 23 years. The agreement is that the rent will be £400 per annum for the first three years and thereafter £l per annum for 20 years. After the trader has paid his rent of £400 per annum for the first three years—making £1,200 he has a 20-year lease on the machinery, and, because it carries with it a consideration of a payment of rent of £1 a year, he can buy that machinery for a nominal sum—say, £5—at the end of the bunched-up rent period. He may at that time be possessing machinery to the value of £500 which he has bought for that nominal sum.

He is then able to repeat the process, leasing back some of the machinery to another financier at, say, £200 a year for three years and then purchasing the tail end of the lease, again for a nominal sum. In the process he will have paid a rent of £1,200 on the first transaction and £600 on the second, and will have bought the machinery for £5, making a total of £1,805, less a lump sum of £500 received on the second transaction. As a result he would be allowed deductions in computing his profits up to £1,800, and would not be chargeable in respect of the £500 which he had received. This device could be repeated.

Clause 17—and I refer to it now only to contrast it with this Clause—deals with the case where the trader enters into leasing arrangements of trade assets which he already owns. Matters are then so arranged that he makes an unreasonable "tax profit" from the scheme. This is the same form of bunched-up leasing. It may not be necessary for me to refer to it again now, although at a later stage I will do so if the Committee wishes. Clause 18 concerns the same process when it is executed with regard to land.

Leasing to acquire capital, and the raising of a loan on the security of property, is common and wholly unobjectionable, but there is no reason why it should attract substantial tax relief which would not be available if the capital had been raised by some other method. These Clauses are devised to hit only at such artificial transactions, of which I have given an example.

This form of evasion is in its infancy. It came to the attention of my right hon. Friend just before his Budget statement and it has been included in the Bill. As the Committee will appreciate, a number of Government Amendments have been put down because we have had to consider complex and difficult problems in going into the intricate detail which is necessary to deal with artificial leasing arrangements. The remedy proposed is that a capital sum should be chargeable under Case VI up to the total of deductions allowed for the bunched-up rent. It is the same principle as the balancing charge, where allowances which have already been given are clawed back when events show that they have been excessive. This charge is the same.

This Amendment, together with Amendments Nos. 51 and 52, deal with a loophole in the Clause as now drafted which became apparent on closer examination. It was a loophole connected with associated persons, in respect of which it appeared that by the use of certain devices, by associating subsidiaries with the various transactions, the intention of the Clause could be thwarted. The Amendment that I have moved deals with the Income Tax aspect and Amendment No. 51 with Profits Tax. Amendment No. 52 is consequential, and Amendments Nos. 73 to 83, and No. 85, are merely consequential Amendments in Schedule 7, which is the Schedule that provides the machinery to deal with what is set out in the Clause, relating to leases to traders and others.

The object of the Clause is to correct excessive tax advantages which are enjoyed in cases where excessive rents are paid for plant which qualifies for tax relief, and where, later, the lessee receives the capital sum. This correction is made by withdrawing that tax relief. I hope that I am not wearying the Committee with examples, but it is easier to explain the matter by using examples. I should like to give one that is most apposite in showing where the gap in the Clause arose.

Let us suppose that trader A leases to leasing company B, an asset, or some plant, at £20,000 per annum for three years and, thereafter, £500 per annum for 17 years—in other words, a bunched-up rent with a very high rent at the start of the transaction. The next day leasing company B sub-leases to company C, which is a trading subsidiary of company B, for £40,000 per annum for three years—a bunched-up rent—and thereafter £500 per annum for the remaining 17 years, if the agreement is for 20 years. The next day company B assigns its lease from trader A with the benefit of the sub-lease to company C, to a dealer, D, for £50,000.

The Clause would provide that the charge on the capital sum received is limited to the amount of tax relief received. Since B, as the original leasing company has had no tax deductions under the lease under the terms of the present Clause, it would then be entitled to pay no tax on the £50,000; and C, the second of the companies, having paid rent, would be entitled to a tax deduction, and C would not be subject to any tax under Clause 16.

7.0 p.m.

I apologise to the Committee for using capital letters, but as hon. Members will appreciate, these matters are of the greatest complexity and intricacy. I hope, therefore that hon. Members will be patient if the examples have to have capital letters to try to distinguish between the various parties to the different agreements. The Amendments are designed to stop that gap by making B liable in respect of the capital sum up to the limit of any deductions accruing to its subsidiary C. Generally, therefore, the Amendments stop the avoidance by taking account of tax reliefs enjoyed by an associated person—an "associated" person is defined in paragraph 5 of Schedule 7—in determining the limit of charge under the Clause in respect of a capital sum claimed for the lessee's right under the lease of the plant.

Amendments No. 73 to 83 will effect what is the purpose of Amendments No. 50, 51 and 52. They are consequential and their effect is in each case to ensure that as the sum is received by a different member of a group of companies the charge imposed is not avoided by the device of C; that the sum was received by a member of the group. It is necessary, therefore, in the Clause to widen the references in Schedule 7 to sums obtained for the rights of the lessee under the lease of an asset. These Amendments make the necessary alterations in various places in the Schedule. That, broadly, is the purpose of Clause 16. This is a technical Amendment. The consequences which flow from it ensure that the mischief which Clause 16 was designed to prevent is dealt with and the purpose of the Clause is not thwarted by the use of associated or subsidiary companies.

Mr. McMaster

Anxiety has been expressed that this Clause, as amended, might affect ordinary hire-purchase dealings. Can my right hon. and learned Friend give an assurance that consideration has been given to this point and care taken to avoid interfering in any way with ordinary hire-purchase agreements made by a group of companies?

The Solicitor-General

There is a group of Amendments, which will be discussed later, relating to hire purchase. It might be more convenient if I deal with that matter when we come to Amendments Nos. 53 to 86. If my hon. Friend is content to do so, I should prefer that he wait until that stage.

Mr. Mitchison

These Amendments are designed to deal with tax avoidance which I suppose, within Parliamentary language, I could call "wangling", but perhaps I cannot add the epithet which might occur to many of us. I wonder who thinks these things up. I have nothing to say against people who conduct their business and transactions with the Revenue in an ordinary and straightforward manner, but this, so far as I can see, is not straight dealing and, of course, the Government are perfectly right to take steps to deal with it. The Order Paper is covered with Amendments in the name of the Chancellor which are designed to stop other leaks of the same kind or, if hon. Members prefer, faults in the Clauses which have been put forward to deal with this trouble. Apparently, the Treasury heard about it only fairly lately.

I have come to the conclusion that if I were proposing to embark on the business of professional tax avoidance, I should expect to be found out sooner or later and dealt with. I should, therefore, take care to tell someone in the Treasury about it, or get associated persons to tell someone, not too long before the next Budget. In that way there would be put forward long and detailed Clauses on behalf of the Government which would nearly deal with the trouble, but not quite. The result would be that I should get away with it for another year.

This seems to me to illustrate the kind of thing which we have said time and again from these benches, that we wish the Government had power to deal with matters of tax avoidance and exercised it at other times than on the occasion of the annual Finance Bill. It shows the extreme difficulty which arises in relation to these matters. Here we see one hole in the Government's remedy which has been stopped at the last moment. How many more are there? One almost despairs of trying to deal with this kind of thing by tax avoidance Clauses in a Finance Bill. They just seem not to do the trick.

Back come the Government of the day, time after time—all Governments have been in the same position—and they find themselves running along trying to catch up with the tax avoiders and their astute advisers. They catch them for the moment, but then these tax avoiders are away again, taking advantage of another little flaw or a totally different method of getting round the law. Whether it is A, B, C, D or X, Y, Z or whatever it is, or how many people are ganging up together or forming companies for these operations, goodness knows. I hope that steps may be taken in the Treasury, if that is at all possible, to get the matter right before the Government come forward with a Finance Bill.

The number of Amendments put down by the Chancellor is excessive. I see the reason for them and if, as I think, it is the inevitable reason, the cause ought to be removed and there ought to be consideration of other methods of dealing with this kind of thing. That has been said before from these benches. Meanwhile, I assure the right hon. and learned Gentleman that he will get no opposition from us over measures designed to prevent tax avoidance. We appreciate the clarity and conciseness with which he has put a very difficult matter before the Committee. We shall not object to the Amendments. We have some Amendments arising on a different point which we shall deal with later.

Amendment agreed to.

Further Amendments made: In page 14, line 34, at end insert: or, before, at or after that time, the lessor's interest in the lease, or any other interest in the asset, has belonged to a person associated with the person who made the payment, and that person so associated with the person who made the payment has obtained a capital sum in respect of that interest".

In page 14, line 35, leave out "who made the payment" and insert "obtaining that sum".—[The Solicitor-General.]

Mr. Diamond

I beg to move, Amendment No. 16, in page 15, line 2, to leave out "under a lease created" and insert "made".

The Chairman

I think it would be convenient also to discuss the following Amendments:

In page 17, line 31, leave out "under a lease created".

In page 18, line 1, leave out "after 14th April 1964".

In line 2, after "is", insert "or has been".

In line 3, at end insert "after 14th April 1964".

In line 15, leave out "after 14th April 1964".

In line 16, after "is", insert "or has been".

In line 17, after "and", insert "after 14th April 1964".

Mr. Diamond

I think that that would be very convenient, Sir William. The Amendments we are discussing together are all of a kind. If I explain the first we need not waste time in repeating the argument on the related Amendments to the following Clauses. I thought it convenient that the right hon. and learned Gentleman dealt with the three Clauses together. Before he rose, I thought I understood what the Clause was about and that my Amendment was well placed, but I am not absolutely sure about that now. However, I had better proceed with the argument.

The right hon. and learned Gentleman said that the way in which this avoidance was deterred or prevented was by taxing a capital sum. By a slip of the tongue at one stage he referred to a capital charge. I do not altogether disagree that there might be a capital charge, much as I am against capital punishment. The amount of tax which could be avoided, we have been told, could run into hundreds of millions of pounds.

There are two reasons why we are very anxious that these Amendments should be fully discussed and, if appropriate, accepted. The first is their effect on these Clauses. The second is their effect on tax avoidance generally. Dealing with the second first, tax avoidance of this kind becomes possible because we have not got a capital gains tax. Therefore, it is possible for people to charge and get relief from taxation on payments and for other people to receive sums which are, in effect, the equivalent but which are called capital by nature as opposed to income and therefore do not fall to be taxed.

We get the situation in which payments of an equivalent amount are going out and coming in. The outgoing payments are relieved from tax and the receipts are not taxed because they are called capital. One is called expenditure and one is called capital and we get this ridiculous situation. If we had a capital gains tax we would not be bothered with these matters because it would not be worth while to try to convert income into capital which all these things aim to do. We are anxious that these Amendments should be accepted because these avoidance schemes are being encouraged by the Government by their practice in dealing with the question of timing.

An avoidance scheme is profitable if one can have a full run on the whole scheme. If the scheme is stopped at a very early stage it ceases to be profitable. Therefore, the whole point is to try to get the scheme stopped as early as possible. My hon. and learned Friend the Member for Kettering (Mr. Mitchison) suggested one method to which several of us have referred previously, but what I am referring to is the discouragement of proposals for tax avoidance. Proposals are encouraged if the tax experts know that it is the practice of the Government every time an avoidance scheme is stopped to say to those who have a scheme running, "We will allow you to recoup the full benefit of your scheme."

If we could make it clear to everyone that the Government now take the view that where a tax avoidance scheme is stopped it is stopped immediately in midstream, that would be a great discouragement to those who advance these schemes. They would know that it would not be worth the trouble and expense involved for the taxpayer in mounting an avoidance scheme of this complicated kind. The Solicitor-General described a possible example. It involved a number of leases, a vast number of stamp duties, professional fees galore, doubtful questions about the use of property in the meantime and a host of practical difficulties and expenses. People will not go to that expense unless they know that they will be profitably rewarded by a tax saving.

7.15 p.m.

We shall deter people from initiating tax avoidance schemes by making it known that schemes will be stopped immediately. Therefore, the Amendment proposes, instead of allowing—as subsection (3) does—payments made under a lease created on Budget day to escape the net, to allow only payments made prior to Budget day and not payments made by a lease created prior to Budget day which might continue for years. As the Solicitor-General explained in the examples he gave, there would be bunched-up payments running over three years or five years and nominal payments would be made thereafter. We want to make quite clear that only those payments made before the Chancellor made his statement have any right whatsoever to be included in the general protection afforded in the case of retrospective legislation.

We are not proposing retrospective legislation; we are not suggesting anything retrospective in the slightest degree. We are saying that payments made when the law stood as it stood at that time are perfectly valid payments, but we say that it is quite wrong to give, as it were, safe conduct to anyone who has entered a scheme in regard to payments made, however long they may continue, if they are to be of benefit to the taxpayer. I thought, before the right hon. and learned Gentleman rose, that they would be of benefit to the taxpayer and therefore the stopping of these payments would achieve our purpose. I still think it does that, but he will appreciate that what he said was weighty and well worth long consideration. We have not had time to give consideration and discussion to what the effect of the Clause as amended may be.

The purpose of the Amendment may not be achieved by the drafting, although I suspect that it will be, because my hon. and learned Friend the Member for Kettering has done the drafting. I hope I have made clear that the purpose is not to affect in any way a scheme retrospectively but is merely not to give a tax avoider a free run and safeguard him in getting benefit from the time when the Chancellor made his Budget Statement.

The Solicitor-General

The hon. Member for Gloucester (Mr. Diamond) is completely right in what he alleges that the Amendment seeks to do. He has paid the right tribute to his hon. and learned Friend who, in effect, has effected the purpose of the Amendment. The purpose of the Amendment is to see that payments made after Budget Day, as opposed to agreements entered into before Budget Day, are caught by the Bill.

The hon. Member seemed to advance the argument, which he raised on Second Reading, that it becomes necessary always to undertake tax avoidance schemes because there is no capital gains tax. That is what his hon. and learned Friend said also on Second Reading and, I think, in discussion of the last Amendment. I point out to both hon. Members that only a tax on capital gains at the same rate as a tax on income can be completely successful in stopping these devices. The arguments demand a capital gains tax at an equal rate. If there were not a capital gains tax at an equal rate there would always be not only substantial but marginal profits which such avoiders would seek to obtain.

The Bill seeks to ensure that capital sums which are so called capital sums shall be treated as income and taxed accordingly within the limits of the Clause, and in respect of this and Clauses 17 and 18 the amount deductible in computing trading profits will mean an added liability on the taxpayer's marginal rate, which is likely to be higher than any general capital gains tax could be.

The main arguments raised by the hon. Member for Gloucester are really the arguments of deterrent, but he disclaimed that there was any retrospective effect. While we have the present system of a man being able to arrange his affairs in accordance with the law, it is a serious step to seek to alter the law so as to affect the consequences of agreements which, when made, were wholly lawful agreements; and it is only in particularly serious cases—very rare cases indeed, I should have thought, and usually after warnings have gone unheeded, and even then only rarely—that there should be introduced by Parliament a system so that there is an alteration of the law so as to affect the agreement which has been entered into and which, at the time it was made, was wholly lawful.

It is not a criminal offence to arrange a person's affairs so as not to attract tax. That is our system and principle of legislation. It is the burden imposed on Governments and the House of Commons to establish by law what is unlawful and it is the right of the citizen to manage his affairs within the law. This may be a great burden, but it is a price, perhaps a somewhat heavy one, that is worth paying. It means that we should not change the law except by due process; and these Amendments involve an element of retrospection because the tax effect of the transactions entered into before Budget day, 14th April, would be different.

Mr. Jay

I shrink from entering into this discussion. Would this be retrospective only in the sense that any change in the rate of Income Tax is retrospective in so far as it falls on an income paid after the change in the law but due to some contract made before the change in the law? Is it not inevitable that that happens whenever Income Tax or any other tax is raised? Should the Solicitor-General describe this as being retrospective in the way he has?

The Solicitor-General

It is retrospective, nevertheless. It is because the evil is such, in the hon. Gentleman's view, in the case of the tax avoider that he must be deterred; and to deter one must do it in this way, the implication being that the Government may have to be rough, tough and unfair in doing it. I reject that, and say that here is an agreement which has been entered into, in which there are two parties—and I will consider the effect of the Amendments on one party as opposed to another later—at a time when the agreement was lawful. Agreements of that type start with certain consequences. There may be consequences which have already happened and which may have an effect on the consequences which will flow from that happening and concern the agreement and the payments to be made. In those circumstances, if one alters the law it means that one is altering the consequences of such an agreement. One is, therefore, doing a drastic thing because it is, in effect, changing the whole of the situation which was not contemplated at the time the agreement was arranged and made.

Mr. Jay

I would like to press this question. Supposing someone enters a contract to pay a certain rent over a certain period of years, a perfectly legal and proper thing to do. Supposing that in the course of that period the Chancellor raises the standard rate of tax. It follows that the tax is increased on the payments on the contract entered into before that alteration in the law was made. In such circumstances nobody would suggest that, for that reason, people who were deriving their income from such a contract should not pay the same higher rate of Income Tax after the change as other people.

The Solicitor-General

It is clear that any consequence from a change in taxa-

tion can affect all kinds of agreements, but that can be within the contemplation of all the parties to an agreement at any time, whether it is an agreement to hire personal services or to hire or rent premises or assets, with which we are dealing. I certainly consider that that must be contemplated.

The tax may be such that one party will get less. That is not affecting the relationship between the two parties but the relationship between the party and the Government or the party and the Income Tax. What the Amendments seek to do is to alter the consequences of an arrangement which has been made, and if one does that one is then interfering by law in an arrangement which has been perfectly lawful and about which the parties who entered into it anticipated the consequences that would flow from the law as it existed when the agreement was made—that is, unless one accepts the fact of retrospective legislation. If one accepts that, one is saying that although an agreement was entered into when it was right and lawful to do so it is now considered that it was so wrong that the Government intend to ensure that the parties to the agreement do not get the benefits and the Government also intend to show that it was a wrong agreement.

That is an understandable position, but it is wrong to say that that does not involve an element of retrospection. I suggest that it does. When arrangements of this kind are made the results are shared between the two parties. The tax is charged on only one, and it is obviously impracticable to apportion it. One party would have to bear the whole of the tax imposed to neutralise the tax advantage which has arisen, notwithstanding the fact that the other, the financier, would, in such an arrangement and agreement, have got for himself a very substantial part of the benefit.

The principle which has been carried out by the Bill is to accept the fact that agreements entered into before Budget Day, before the announcement was made, were lawful, but that they involve tax avoidance, that the Government are seeking by these Clauses to prevent that avoidance in future and that any other method of dealing with the situation would be retrospective legislation, if one likes to call it by another name. For that reason, I advise my hon. Friends to resist the Amendments.

Mr. Diamond

When I spoke earlier, I approached the matter with due humility as one who, in a difficult field, might not be certain that he is right. I have no such humility in this situation. We have established the case absolutely clearly; that the Amendments are correctly drafted and that the purpose of them has been achieved. The difference between the two sides of the Committee does not rest on a question of fact or law but simply on a question of principle, on which we feel extremely strongly indeed. I dare say that hon. Members opposite feel equally strongly the other way, and, therefore, the debate has done nothing but good by bringing this to light.

7.30 p.m.

Let me remove, first, the minor point of the capital gains tax. The right hon. and learned Gentleman is correct in saying that only if capital gains are taxed at an equivalent duty is the possibility of some benefit completely avoided. It is equally right to say that, if it is at half the rate, it is made half as attractive. It becomes much less attractive when any adjustment of that type is made. Only when there is a very large margin involved does it become worth while. However, that is not the major point.

The major points are the two which I made and which have not been resisted. The first is that the Government, by taking this attitude, are encouraging tax avoidance. I made that point with some reservation earlier. I remove all reservation now. The speech made by the Solicitor-General was an encouragement to everybody to take further avoidance measures and go through this Clause and the Amendments word by word and comma by comma to find in what way the way is charted. The way tax avoidances arise is that the more legislation one provides the more one charts the way as to things which one cannot do and therefore directs investigation to the things which one can do. Avoidance legislation merely creates the possibility of further avoidance. Everyone knows this.

The only way to stop further avoidance schemes being prepared is to make it clear that real damage would be suffered by the parties who entered into this conspiracy—let us be clear about it—to defraud the Revenue. It is nonsense to talk about these two holy gentlemen entering into an agreement together to do a perfectly ordinary piece of business. The whole thing is carefully excluded by the Bill. The right hon. and learned Gentleman and others who have spoken on this have made it clear that normal bona fide transactions are not touched. We are not concerned with those who have to do business together and enter into a contract and carry out their business. They are protected.

We are concerned with those who enter into purely artificial transactions and know full well what they are doing. The financier involved knows precisely why he has entered into a ridiculous agreement which says, "For the first three years you shall pay £500 a year and for the next ten years you shall pay 5d. a year". It is a nonsensical agreement. The financier knows precisely why he is doing it and the risks he is taking. He knows that under this Government he is taking no risks whatsoever. He is being granted safe conduct to the very end of the road, because the Government are committed to saying, "No matter what the purpose of the agreement is, we must respect it completely. It is an agreement between two people to defraud the Revenue and we must respect it to the end of the day".

The Labour Party cannot accept that attitude and philosophy. Of course the right hon. and learned Gentleman is right in saying that, if the Amendments were carried, one party to the agreement would suffer damage. Why not? That is what we want. We want to stop people starting these schemes because they will know that they do not get safe conduct to the end of the road, that they do not come into harbour safely. There may be a Government who will stop them in mid-stream, in which case one side or the other will not get his bargain and will not get full co-operation from the Government to provide the tax benefit, which is the sole purpose of entering into the scheme.

The Solicitor-General

What lawful agreements does the hon. Gentleman say that it is right for Parliament to declare unlawful or declare that the benefit from them should not subsist to a party to the agreement?

Mr. Diamond

I am no lawyer, but I thought that I had made it clear when I said that these were not two people entering into a normal business deal. These are two conspirators entering into a ridiculous contract to defraud the Revenue. That is the sole purpose of it. I do not know why one should mince words here. One does not hire plant at £500 a year for the first three years and then at 5d. a year to get a machine of a particular type. One does not go into business in that way. This is what we are talking about. We are talking about the kind of agreement the right hon. and learned Gentleman explained to us, where there are ridiculous rents bunched up in the first three years and virtually nothing in the next period. Why?—so that one can then assign a lease, assign what is a valuable asset, to somebody else, and under our present capital-gains-free system make a large capital gain, pay no tax on it and, with the co-operation of the Conservative Government, go home happily, telling the driver to put full steam ahead on the Bentley and drive home as fast as he can.

That is a nice situation. We do not approve of it. We do not want any retrospective legislation at all, and we are not having it. What we are saying is that any agreements entered into before the law was altered are, unfortunately, safe, because they were entered into when the law was as it was. Any payments made after the law had been altered are covered by the existing law in exactly the same way as Estate Duty, for example. Would the right hon. and learned Gentleman now give an undertaking that everybody who enters into a scheme to avoid Estate Duty as the law now stands will have safe conduct until he is well and truly buried? Of course not. Almost every year new legislation is introduced to stop schemes which are in existence but which have not come to fruition because the people are still alive and the property has not yet passed. That is happening all the time. It should happen in this case.

Before I get completely out of control, I ask my hon. Friends to support me on this issue in the Lobby.

Question put, That the words "under a lease created" stand part of the Clause:—

The Committee divided: Ayes 175, Noes 130.

Division No. 98.] AYES [7.36 p.m.
Agnew, Sir Peter Curran, Charles Grosvenor, Lord Robert
Atkins, Humphrey Dalkeith, Earl of Gurden, Harold
Awdry, Daniel (Chippenham) d'Avigdor-Goldsmid, Sir Henry Hamilton, Michael (Wellingborough)
Barlow, Sir John Deedes, Rt. Hon. W. F. Harris, Frederic (Croydon, N.W.)
Barter, John Digby, Simon Wingfield Harris, Reader (Heston)
Batsford, Brian Doughty, Charles Harrison, Col. Sir Harwood (Eye)
Beamish, Col. Sir Tufton Drayson, G. B. Harvey, John (Walthamstow, E.)
Bell, Ronald Duncan, Sir James Henderson, John (Cathcart)
Biffen, John Eden, Sir John Hiley, Joseph
Bingham, R. M. Elliot, Capt. Walter (Carshalton) Hill, J. E. B. (S. Norfolk)
Birch, Rt. Hon. Nigel Elliott, R.W. (Newc'tle-upon-Tyne, N.) Holland, Philip
Bishop, Sir Patrick Emmet, Hon. Mrs. Evelyn Hollingworth, John
Black, Sir Cyril Errington, Sir Eric Hooson, H. E.
Bossom, Hon. Clive Farey-Jones, F. W. Hughes-Young, Michael
Bourne-Arton, A. Farr, John Hutchison, Michael Clark
Bowen, Roderic (Cardigan) Fell, Anthony Iremonger, T. L.
Boyd-Carpenter, Rt. Hon. John Finlay, Graeme Jenkins, Robert (Dulwich)
Boyle, Rt. Hon. Sir Edward Fisher, Nigel Johnson, Eric (Blackley)
Braine, Bernard Fletcher-Cooke, Charles Johnson Smith, Geoffrey
Brown, Alan (Tottenham) Fraser, Ian (Plymouth, Sutton) Jones, Rt. Hon. Aubrey (Hall Green)
Burden, F. A. Galbraith, Hon. T. G. D. Kaberry, Sir Donald
Butcher, Sir Herbert Gammans, Lady Kerans, Cdr. J. S.
Campbell, Gordon Gardner, Edward Kerr, Sir Hamilton
Carr, Compton (Barons Court) Gibson-Watt, David Kirk, Peter
Carr, Rt. Hon. Robert (Mitcham) Giles, Rear-Admiral Morgan Leavey, J. A.
Channon, H. P. G. Gilmour, Ian (Norfolk, Central) Lewis, Kenneth (Rutland)
Chichester-Clark, R. Glover, Sir Douglas Lilley, F. J. P.
Clark, Henry (Antrim, N.) Gough, Frederick Loveys, Walter H.
Cooper, A. E. Grant-Ferris, R. Lubbock, Eric
Cordeaux, Lt.-Col. J. K. Green, Alan Lucas, Sir Jocelyn
Coulson, Michael Gresham Cooke, R. Lucas-Tooth, Sir John
Craddock, Sir Beresford (Spelthorne) Griffiths, Eldon (Bury St. Edmunds) McAdden, Sir Stephen
Cunningham, Sir Knox Grimond, Rt. Hon. J. MacArthur, Ian
McLaren, Martin Pitt, Dame Edith Tapsell, Peter
Maclay, Rt. Hon. John Pounder, Rafton Taylor, Sir Charles (Eastbourne)
Macleod, Rt. Hn. Iain (Enfield, W.) Powell, Rt. Hon. J. Enoch Taylor, Frank (M'ch'st'r, Moss Side)
McMaster, Stanley R. Price, David (Eastleigh) Teeling, Sir William
Macmillan, Maurice (Halifax) Prior, J. M. L. Thatcher, Mrs. Margaret
Maddan, Martin Prior-Palmer, Brig. Sir Otho Thomas, Sir Leslie (Canterbury)
Maitland, Sir John Pym, Francis Thompson, Sir Kenneth (Walton)
Marlowe, Anthony Rawlinson, Rt. Hon. Sir Peter Thornton-Kernsley, Sir Colin
Marshall, Sir Douglas Redmayne, Rt. Hon. Martin Thorpe, Jeremy
Marten, Neil Rees-Davies, W. R. (Isle of Thanet) Touche, Rt. Hon. Sir Gordon
Matthews, Gordon (Meriden) Renton, Rt. Hon. David Turton, Rt. Hon. R. H.
Maude, Angus (Stratford-on-Avon) Ridley, Hon. Nicholas Tweedsmuir, Lady
Maudling, Rt. Hon. Reginald Ridsdale, Julian van Straubenzee, W. R.
Mawby, Ray Roberts, Sir Peter (Heeley) Vane, W. M. F.
Maxwell-Hyslop, R. J. Robson Brown, Sir William Vickers, Miss Joan
Maydon, Lt.-Cmdr. S. L. C. Roots, William Wade, Donald
Miscampbell, Norman Russell, Sir Ronald Walder, David
Montgomery, Fergus Scott-Hopkins, James Walker, Peter
More, Jasper (Ludlow) Shaw, M. Ward, Dame Irene
Morrison, Charles (Devizes) Shepherd, William Webster, David
Neave, Airey Skeet, T. H. H. Wilson, Geoffrey (Truro)
Osborne, Sir Cyril (Louth) Smyth, Rt. Hon. Brig. Sir John Wise, A. R.
Page, Graham (Crosby) Spearman, Sir Alexander Wood, Rt. Hon. Richard
Parmell, Norman (Kirkdale) Stainton, Keith Worsley, Marcus
Percival, Ian Stevens, Geoffrey
Pickthorn, Sir Kenneth Studholme, Sir Henry TELLERS FOR THE AYES:
Mr. Peel and Mr. Hugh Rees.
Allen, Scholefield (Crewe) Hamilton, William (West Fife) Noel-Baker, Francis (Swindon)
Barnett, Guy Hannan, William Noel-Baker, Rt. Hn. Philip (Derby, S.)
Bence, Cyril Harper, Joseph Oliver, G. H.
Bennett, J. (Glasgow, Bridgeton) Hayman, F. H. O'Malley, B. K.
Blyton, William Henderson, Rt. Hn. Arthur (Rwly Regis) Oram, A. E.
Bottomley, Rt. Hon. A. G. Hilton, A. V. Oswald, Thomas
Bowden, Rt. Hn. H. W.(Leics, S. W.) Holman, Percy Owen, Will
Bowles, Frank Houghton, Douglas Pannell, Charles (Leeds, W.)
Boyden, James Howie, W. Pargiter, G. A.
Bray, Dr. Jeremy Hughes, Emrys (S. Ayrshire) Paton, John
Brockway, A. Fenner Hunter, A. E. Pavitt, Laurence
Brown, Rt. Hon. George (Belper) Hynd, H. (Accrington) Price, J. T. (Westhoughton)
Butler, Herbert (Hackney, C.) Janner, Sir Barnett Probert, Arthur
Butler, Mrs. Joyce (Wood Green) Jay, Rt. Hon. Douglas Pursey, Cmdr. Harry
Callaghan, James Jeger, George Randall, Harry
Carmichael, Neil Johnson, Carol (Lewisham, S.) Rankin, John
Chapman, Donald Jones, Rt. Hn. A. Creech (Wakefield) Redhead, E. C.
Cliffe, Michael Kelley, Richard Rees, Merlyn (Leeds, S.)
Collick, Percy Kenyon, Clifford Rhodes, H.
Corbet, Mrs. Freda Key, Rt. Hon. C. W. Robertson, John (Paisley)
Crosland, Anthony King, Dr. Horace Robinson, Kenneth (St. Pa[...], N.)
Crossman, R. H. S. Lawson, George Rogers, G. H. R. (Kensington, N.)
Cullen, Mrs. Alice Ledger, Ron Ross, William
Davies, S. O. (Merthyr) Lee, Frederick (Newton) Shinwell, Rt. Hon. E.
Diamond, John Lee, Miss Jennie (Cannock) Silverman, Julius (Aston)
Dodds, Norman Lever, L. M. (Ardwick) Skeffington, Arthur
Doig, Peter Lipton, Marcus Small, William
Donnelly, Desmond Loughlin, Charles Snow, Julian
Edelman, Maurice Mabon, Dr. J. Dickson Sorensen, R. W.
Edwards, Walter (Stepney) McBride, N. Steele, Thomas
Evans, Albert MacColl, James Stonehouse, John
Fletcher, Eric McInnes, James Stross, Sir Barnett (Stoke-on-Trent, C.)
Foley, Maurice McKay, John (Wallsend) Swain, Thomas
Foot, Dingle (Ipswich) MacKenzie, J. G. Wainwright, Edwin
Foot, Michael (Ebbw Vale) McLeavy, Frank Warbey, William
Forman, J. C. Mallalieu, E. L. (Brigg) Weitzman, David
Fraser, Thomas (Hamilton) Mallalieu, J.P.W. (Huddersfield, E.) Wells, William (Walsall, N.)
George, Lady Megan Lloyd(Crmrthn) Manuel, Archie Wilkins, W. A.
Ginsburg, David Marsh, Richard Willey, Frederick
Greenwood, Anthony Millan, Bruce Willis, E. G. (Edinburgh, E.)
Griffiths, David (Rother Valley) Milne, Edward Woof, Robert
Griffiths, Rt. Hon. James (Llanelly) Mitchison, G. R. Yates, Victor (Ladywood)
Griffiths, W. (Exchange) Morris, Charles (Openshaw)
Hale, Leslie (Oldham, W.) Moyle, Arthur TELLERS FOR THE NOES:
Mr. McCann and Mr. Ifor Davies.
The Solicitor-General

I beg to move, in page 15, line 43, at the beginning to insert "Part I of".

It might be for the convenience of the Committee to discuss this Amendment with Amendment No. 54, at end add: but, in relation to a lease which constitutes a hire-purchase agreement as defined in Part II of Schedule 7 of this Act, this section shall have effect subject to the modifications set out in the said Part II".

Amendment No. 72, Schedule 7, in page 33, line 2, at end insert—

  1. "PART I". 11 words
  2. cc1339-45
  3. PART II 2,602 words
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