New Clause.—(FEU DUTY.)

HC Deb 18 June 1964 vol 696 cc1682-99

(1) In assessing the liability to income tax of any person for the year 1963–64 or any subsequent year, any payment of feu-duty made by that person shall be treated as a general charge on income.

(2) No person shall by virtue of this section be liable to pay any more tax than that person would have been liable to pay if this section had not been passed.—[Mr. Willis.]

Brought up, and read the First time.

Mr. Willis

I beg to move, That the Clause be read a Second time.

The new Clause seeks to revert to the pre-1963 practice in Scotland of allowing feu duty to be treated as a general charge against income. The intricacy of calculation in connection with this matter is not a field into which I would normally enter even at my brightest and best.

Mr. Callaghan

Where are the Law Officers?

Mr. Willis

That is another matter, and it shows that I am not at my brightest and best that I have not called attention to their absence. After one o'clock in the morning I enter this field with even greater trepidation, but I feel bound to raise the matter even at this hour because owner-occupiers in Scotland have felt a great deal of concern about it. I have had correspondence with the Financial Secretary about it and I should like to thank him for his letters.

Many owner-occupiers when they received a Schedule A form for Income lax at the end of last year found that they were being charged with certain sums. They were worried and could not understand this because they thought that with the abolition of Schedule A there would be no more tax to pay. They could not understand why they had to pay a certain proportion of their Income Tax in January. Many of them spoke to me about it at the time and I believe that my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) had a Question down on the subject. People then began to have a vague understanding that in future feu duty would not be allowable as a general charge against income and that Income Tax would be payable on it. This meant in a number of cases, where assessment under Schedule A was offset by maintenance charges, that people found themselves worse off as a result of the abolition of the Schedule A assessment than they were prior to that abolition. I am indebted to my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), who has very nobly tried to assist me to understand this matter. I am not sure that I have been a good pupil, but that is no fault of his, and I have no doubt that, if he catches the eye of the Chair later on, he will be able to explain matters much better than I can.

1.15 a.m.

As I understand it, the history of the matter and the Government's argument on it go something like this. Prior to 1940, feu duties were not intended to be treated as a general charge against income, that is, any kind of income, but only as a set-off against Schedule A tax which was paid. Feu duties were originally, prior to 1940, paid gross. Therefore, if Schedule A tax was assessed at tax on £20 and there was a gross feu duty of £10, Schedule A tax would be reduced to tax on £10. If Schedule A tax was not payable, because of maintenance claims, then feu duty was payable gross and there was no further adjustment; in other words, there was no tax allowance for that feu duty paid. That was the law. But the practice, as the hon. Gentleman admitted in his letter to me of 9th June, was rather different. The practice was that it was allowed as a charge against income.

In the Finance Act, 1940 by Section 17—and later, in the Income Tax Act, 1952, by Section 177—there was a change providing that feu duty would be paid net. In that case, with a Schedule A assessment of £20, Schedule A tax was payable on £20 but tax deducted from the feu duty of £10 was retained as a set-off. If this had been the only change made in 1940, then, where no Schedule A tax was payable, the tax deducted from feu duty paid would have had to be paid over to the Revenue.

In 1940 another change was made which, according to the Government, was a mistake, namely, that the feu duty became a general charge on income. Even so, there was no effective change when Schedule A was payable, but when Schedule A tax was not payable, because of a maintenance claim, the tax deducted from the feu duty paid was not accounted for to the Revenue.

This unexpected result, according to the Financial Secretary's letter to me of 4th May, would have been of only minor importance if maintenance claims eliminating Schedule A tax altogether had been few; but, because Schedule A valuations remained at the pre-war levels and the cost of repairs continued to rise, the number of cases in which Schedule A tax was eliminated altogether increased. Therefore, the anomaly of allowing feu duty as a general charge against income increased in importance. This was the position prior to the abolition of Schedule A.

The opportunity was taken when Schedule A was abolished, in 1963, to put this matter right, by providing that feu duties would no longer be treated as a general charge on income.

As I understand it, that is the Government's argument. I hope that I have stated it correctly.

Mr. Green indicated assent.

Mr. Willis

My first point is that the Government say that the change in 1940 was made for purely technical reasons. They imply that the result of making feu duties a general charge on income was a mistake. I am not so certain about this. If it was a mistake, why was it not rectified during the period which has elapsed since 1940? Why was it not rectified particularly in view of the fact that the Government could clearly see that this was becoming increasingly important and that it was becoming more and more the practice, as the Financial Secretary has said, for the maintenance claims completely to eliminate Schedule A, with the result that the feu duty was becoming increasingly a general charge upon income?

I find it difficult to understand that the Government did nothing about this. I cannot help feeling that what happened in 1940 was that the Government accepted what had been the practice in Scotland before, namely, that this situation had obtained in practice even though it had not been the legal position. It is difficult to understand why no change was made if it was simply an error.

The Financial Secretary admitted in his letter to me of 9th June that prior to 1940, feu duties were, in practice, allowed as a general charge on income. He will remember this.

Mr. Green

The hon. Member is being fair and accurate. The words I used were that until 1940 there was no distinction between feu duties and rents under short leases for tax purposes". An owner-occupier who paid a feu duty could not deduct from it more than the Schedule A tax that he paid.

Mr. Willis

In his letter to me of 9th June, however, the Financial Secretary said: When we exchanged letters on this subject recently I said that until 1940 there was no distinction between feu duties and rents under short leases for tax purposes. I have since been informed that, while this was the law, it seems likely that in practice the Inland Revenue did not trouble to restrict maintenance claim repayments by proprietors of feus to the balance of the tax under the net Schedule A assessment after deducting the amount of tax on the feu duty. In those days maintenance claims were rare and feu duties small, and the point was no doubt regarded as unimportant. I take that as admitting that the practice in Scotland prior to 1940 was what was made legal—accidentally, according to the Government—by the steps taken in 1940.

Therefore, what was done in 1963 was to reverse a principle which had been applied to feu duties in Scotland, not simply for the short period of 24 years, to which the hon. Gentleman referred in his letter to me which I received tonight, but as long back as one could wish to go. This seems to me to have always been the practice.

Mr. Callaghan

It was an extra-statutory concession.

Mr. Willis

I do not know whether it was an extra-statutory concession, but this appears to me, according to what the Financial Secretary has said, to have been the Scottish practice until 1963. This practice should not have been reversed by the legislation that was passed last year. It should have been continued and this would have been more in accord with the Scottish attitude towards feu duties.

In the course of our rather lengthy correspondence, the Financial Secretary says that feu duties are similar to rents and all sorts of other things. I should have thought that the feu duty was more in the nature of an interest payment. It is certainly looked upon by the legal profession in Scotland more as an interest payment than anything else. I think that it is true to say that when feus are advertised for sale in Scotland they are, in fact, advertised as such. Therefore, it seems to me that they are very much akin to the interest which one pays on mortgages, and which are accepted as a general charge against income. I should have thought that that was the analogy more applicable than the analogy which the Minister has made in the course of his long correspondence with me on this subject.

Then, because there is this Scottish legal attitude, I submit that we have another reason for saying that what was the practice until 1963 in Scotland should have been continued afterwards. The whole question of general charges against income is very involved. It is full of anomalies, and it is very difficult for the ordinary owner-occupier to understand why his feu duty cannot be accepted as a charge against income while his bank overdraft can be. There seems to be no rhyme or reason in that difference, and Scottish owner-occupiers think that there is more justification for the feu duty to be accepted as a charge against income than charges on a bank overdraft.

Does the Minister realise that a great many owner-occupiers are now worse off than they were prior to the abolition of the Schedule A tax? By virtue of the change which has taken place, an extra burden has been placed on owner-occupiers. That is particularly unfortunate in Scotland for, if the Government wish to encourage home owenrship, as I believe they do, then the Government's practice must not be to prevent it. In Scotland there has been considerable discussion over the last two or three years about whether we are building sufficient owner-occupier houses. This. I would point out, has a relationship to industry, and it seems to me that there is a case for encouraging more owner-occupiers in Scotland. It should be encouraged to a much greater extent proportionately with the population. If the Government would like to see this, then it seems that we have another argument for accepting this Clause.

I will say no more, because I think that the Minister is pretty fully seized of the facts. I hope that he has listened to my few points and, having heard them, I ask him to be more kindly disposed towards my case and perhaps even to promise to look at this matter and introduce a Clause of his own to meet the points which I have raised.

1.30 a.m.

Mr. Bruce Millan (Glasgow, Craigton)

I rise to make only two points. First, how much would this concession cost if the Clause was accepted? My own impression is that it would not be much. Second, would the Minister deal with this question of anomalies in regard to charges on income, for example, mortgage interest, which is accepted as a general charge on income? That is so although it re lates specifically to one particular item, namely, the purchase of a house. Of course, there is no corresponding hypothetical income now against which that can be set, as there was previously, when we had Schedule A on owner-occupiers. The main argument which I think the hon. Gentleman will put will be that feu duty is very much analogous to rent; but, after all, mortgage interest is also very much analogous to rent, because rent is, as I think the economists would describe it, merely a form of interest payment.

The whole question of charges on income is muddled at present. I do not believe that there is really any discernible principle running through the tax law on this matter. For example, the anomaly of the difference between the treatment of bank overdraft interest and the treatment of hire purchase interest ought to be looked at. The whole question seems to be full of anomalies. The fact is that what the Government did in 1963 did impose on certain owner-occupiers in Scotland not a reduction in their total tax liability, because of the abolition of Schedule A, but an increase. It does not seem to me that there was any reason in principle why that should have happened, if my hon. Friend's suggestion had been adopted in 1963. I think that the Government ought to look at the whole matter very carefully.

Mr. Green

Perhaps I had better begin by answering first the first question by the hon. Gentleman the Member for Glasgow, Craigton (Mr. Millan) on cost, because this is, perhaps, the easiest one. So far as I can estimate it, the hon. Gentleman is quite right: the cost is small; perhaps £1 million a year. However, that, of course, is not really the point, although he was quite right to have asked that question. I hope that the hon. Gentleman the Member for Edinburgh, East (Mr. Willis) will forgive me if I try to deal first with the consequential questions which his hon. Friend raised. It is not from any disrespect to the hon. Gentleman the Member for Edinburgh, East. I promise him he was quite right in what he said—though I am not saying that it is necessarily the case that I accept it; but he put it perfectly fairly and quite rightly.

The whole matter as to whether mortgage interest or interest on other forms of indebtedness or acceptance of obligations should be distinct or should no longer be distinct perhaps from ground rent is, I quite agree, no doubt bound to be a perennial and debateable point. It is not disposed of by the new Clause. Rent has the distinguishing characteristic—at least, it is intended to have—that it confers on the payer of rent a right to occupation of land or premises. This is what rent is supposed to do. As to what is or is not rent I will come to in a moment.

Payment of rent conveys that right, and it is in this sense that it is perhaps distinguishable—though I dare not debate it further, for I am sure that I should be clean out of order—from the forms of interest payment which the hon. Gentleman has suggested. I quite agree that this is a very interesting subject for debate but I doubt whether it arises here. What does arise here, firstly, I think, is whether or not feu duty is properly called a form of rent. [Interruption] The hon. Gentleman raised this point. If he did not I certainly shall not pursue it, because I certainly would much rather not, but according to a note I took down of what he said, he queried whether it really was more analogous to a ground rent or more analogous to a mortgage interest. I think that he did.

Mr. Willis

My point was that it is more analogous to an interest payment. Advertisements for the sale of feus put it in this way.

Mr. Green

The only answer that I can give the hon. Gentleman is this. I will not pretend to give a sort of court judgment, because it would be foolish of me to try to do so, but I believe that, so far, it has been treated as a form of rent. I stand to be corrected on this, but I do not think that it has been successfully challenged in the courts. I do not say that no case could ever successfully be brought to prove that it should not have been so treated, but I think that this is the way that it has been treated so far, and so far this treatment has not been challenged successfully.

This being the case, the Inland Revenue has no option but to consider feu duty in the same way as it considers ground rents in England and Wales, and although I accept straight away that there are technical differences, I do not think the Inland Revenue, seeking to play fairly between England and Scotland, has any option, as the matter now stands, but to treat it as a form of rent. Therefore, the Inland Revenue must not seek to make rent allowable as a charge against general income in Scotland when it is not allowed to be a charge against general income in England. The hon. Member for Edinburgh, East may not agree with my argument, but I think that he is following me and I am not trying to be unfair.

The hon. Gentleman was right to read out the correspondence that I wrote to him, and I should like to pay him a tribute for being good enough to read sufficient of that correspondence and not to read selected parts of it. I agree with him that in practice the law was not really applied in Scotland. Neither he nor I were responsible for the law or the practice of the law. The law itself was not changed, and it did not really matter very much. It was not a matter that caused any anxiety either to the Revenue or to the payers of the feu duties.

The real difficulty arose after the war when, for reasons which I can well understand, the decision was taken not to proceed with the normal quinquennial revaluation for Schedule A purposes. The hon. Gentleman was quite right in saying that coterminous with that decision went the rise in repair costs, so that the gap between reality and the Schedule A valuation, and what could be set off against it legitimately for the maintenance and repair of an owner-occupied dwelling, widened at both ends.

The fact that that revaluation did not take place was one of the reasons why the application of the law affecting Schedule A had fallen way behind the times and it had become a tax which was costly to collect. If one knew the law one could always make a maintenance claim. One could get away with no Schedule A tax on the majority of dwellings.

Simply because one could not do it on a new house, but could on an old one, the anomaly was thereby made the greater. The anomalies were growing within Schedule A. The alternative solutions were as follows. One could have a complete revaluation of Schedule A to show that as a notional tax it was a proper one to retain. If one is going to retain a tax on notional income, one must revalue everything right up to the proper current valuation, and that will take a good deal of time and create a difficulty because people will not understand it. The other alternative is to abolish Schedule A and bring in a new code for taxing rents. Both these things were done in my right hon. Friend's Finance Act.

The consequence is that certain owner-occupiers who used to get the benefit of being able, because of an out-of-date valuation, to set off either the ground rent or the feu duty against the tax on their general income, which would not have been possible if a Schedule A revaluation had been properly carried out, no longer got that benefit. That is really the situation. But because that anomaly existed under which they were getting a totally uncovenanted benefit for a number of years, it followed, as it always must follow when that kind of anomaly exists, that because they were escaping—good luck to them!—for a number of years their share of the tax burden—not a great one in each case, but still a share—that burden was falling on other people. This was not an anomaly which could be kept if one was going to abolish Schedule A, which was the decision taken by my right hon. Friend's predecessor. It was hardly right to perpetuate the anomaly by some Clause in a Finance Bill.

I accept that the removal of a benefit, which is what we are really talking about, is resented by those who no longer have it. I entirely accept this, and I have to stand the racket in political terms for the removal of the benefit. But it would have been desperately anomalous to have perpetuated it, which is, I think, the only way in which I can meet the complaints of those who now find themselves paying a little more tax than they were before.

The generality of people has, I believe, benefited—there is no doubt about that—but a number of people have now found themselves paying more tax in this way. I have to accept that that is the case. But to try to perpetuate what I can only describe as a privilege—[Interruption.] Not only the present Government but our predecessors, the Labour Government, perfectly understandably, did not proceed with the process of revaluation on which alone this tax on notional income, which was the Schedule A tax, could be fairly assessed across all owner-occupiers.

I assure the hon. Member for Cardiff, South-East (Mr. Callaghan) that if he will think this through he will find that this is true. As his hon. and learned Friend the Member for Kettering (Mr. Mitchison) pointed out, this benefit did not apply to a new house. It required revaluation—

Mr. Callaghan

Why not let it be set off against general income? If the only argument is that one cannot set off one's ground rent, do that too. What about the analogy of a man with a bank overdraft which he is allowed to charge against his income? Is this not a similar situation?

1.45 a.m.

Mr. Green

I understand that argument. I thought that I had dealt with it. I also thought that there was a certain amount of acceptance, not necessarily of the force of the argument, but of the logic with which it was pursued. Perhaps the hon. Gentleman was not listening—not that I blame him for that.

I had better say a word or two about this, because one has to be careful not to perpetuate an inequity which benefits some people. It is because it is inequitable that it must hurt some people, because they have to bear the burden of the privilege which other people are getting.

Of course, it is open to argument whether ground rent, or feu duty, or whatever it is, should be allowed against general income, but I beg the hon. Gentleman to realise the consequences of advancing that argument. If we say that ground rent is not rent but an interest charge, we relieve people who pay ground rent, which is a charge permitting the occupancy of land or premises, which I would have thought was wrong. I am not a lawyer, but it has been held to be wrong. Perhaps the matter had better be tested again in the courts. If we do this, why should not we allow all rent against general income? Why should not a tenant have the same privilege?

Mr. Callaghan

The hon. Gentleman is now exposing the whole fallacy of the Schedule A case.

Mr. Green

I do not know from which end of the argument on Schedule A the hon. Gentleman is advancing his case. I do not know which end it is.

Mr. Callaghan

It does not matter.

Mr. Green

It matters enormously. On the one hand, he is saying that ground rent, though not all rents—or is he saying all rents?—should be charged against general income. So far, he has said that ground rents, or feu duties, should be charged against general income. On the other hand, he is saying—

Mr. Callaghan

I am saying that there is no logic in the Government's case, and never has been, and that they are displaying illogicality again. Either we allow rent as a charge against income, in which case we have no right to allow it only for the Schedule A taxpayer, but should allow it for the general tenant who pays rent, whether ground rent or rent payable to a landlord, or we close it up. The Government, for the sake of political expediency, have got themselves into this illogicality purely on Schedule A, and now they are incapable of defending themselves against my hon Friend.

Mr. Green

I am sorry, but the hon. Gentleman has not thought this through at all. It may be a most telling debating point to say that he thought of it years before I was heard of, but he has forgotten v/hat he thought of in the process. I do not have the wonderful memory which some people have, but I think that what the hon. Gentleman and his hon. Friends said about the abolition of Schedule A might make interesting reading. I shall look it up and let the hon. Gentleman know my findings at a later date. I do not think that he was making the same argument then as he is making tonight.

Let us come back to the Clause. That is what we are really talking about. This does not affect any of the arguments that I have made in response to the Clause. The law has so far held that feu duty and ground rent are not to be charged against general income. This is unquestionably the case.

I am sorry that as a consequence of the abolition of Schedule A and the new code of taxing rents, which the hon. Member must not overlook when he talks about this matter, certain people will pay some more tax, but what they are paying is the tax which they were managing quite happily to escape because Schedule A revaluations were not carried out initially by a Labour Government, successively by Labour Governments, and subsequently by Conservative Government. That is the truth of the matter. It is worth looking into the history to see where the story starts.

I cannot recommend the Committee to accept the Clause because—I do not wish to pin my argument on this—it is defective in drafting. If the hon. Member wishes to put it down on Report, I am prepared to tell him in which technical sense it is defective. I offer him that facility if he wishes to have it. But it is on the more general ground that if I accepted it I should be perpetuating an anomaly which I should find it impossible to defend that I ask the hon. Member to withdraw it.

Mr. Mitchison

It is very hard to get any lawyer to explain the differences between English and Scots law, because English lawyers do not understand Scots law and Scots lawyers do not understand English law. In this instance there is even more of a muddle because the Government, owing to their political deficiencies, have no Scots Law Officer in the House and have apparently not thought it necessary to have a representative from the Scottish Office here. We are left to the lucubrations of the Financial Secretary on what seems to be fundamentally a legal question.

I am not concerned for the moment with the history of the matter, which seems to me to turn on the question, "Is it right to regard a Scottish feu duty as something in the nature of an interest payment, a charge, or, on the other hand, as rent?" The right hon. Gentleman and the Treasury have apparently persuaded themselves that it is rent, because they say that it is in some way—as it is—associated with land. But rent is something paid by a tenant to a landlord, and in England, at any rate, it corresponds with an interest in the land which we call a tenancy. The landlord has a corresponding interest in the land; he has a right to go back on the land at the end of the tenancy. The rent is in the nature of a periodical payment which ends when the tenancy ends. I may be a long period—it is in a building lease—or it may be only a matter of a week or two. It is very elastic.

But the feu has two peculiarities which have nothing in common with that. One is that it goes on for ever, subject to one thing. It is a security. In other words, if the feu superior is not paid he can irritate the feu and take back the property. I think that irritating a feu is difficult, but I can say nothing about that. As my hon. Friend pointed out, feu duties are simply, on the other hand, a form of investment. I think that as an executor I am the owner of about half-a-dozen small feu duties. They are unmarketable things. They are sold by advertisement in the papers through writers to the signet or solicitors. I have never seen the property and never expect to see it. They go on being paid. I have no obligation in respect of the property, nor has a feu superior under Scots law.

The Financial Secretary is, perhaps, forgetting that there is something corresponding to a mortgage in Scotland. Talk in Scotland about equity redemption and one is not understood, but talk about bonds or dispositions in security and one is. That is their equivalent to a mortgage. There is no question but that an interest on a bond or disposition is chargeable against one's general income. When one looks at the real nature of these things one finds that one is dealing with something that is unknown to English law, something which represents a conception we do not understand. However, so far as one can look at it logically, it is far nearer a bond or disposition in security than it is to an English rent.

One talks about a ground rent, but what is it? I have never understood the difference between a ground rent and any other rent, except some of the very short rents. There are, for example, rent charges, which are another variety, and it would be interesting to know what the position is on that subject. They are a north of England matter as a rule, but I suggest that this is not a question of a number of people having successfully "got away with it"—I will not say "dodged the law"—and it is a question of whether it is fair to treat this kind of payment in this way.

On going into the matter further it may be found that what my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said is the right answer and that a great many of these charges are illogical. As to keeping to what we have now, the feu, I suggest that the Government could consider, with the advice of the Scottish Law Officers and others, what it is right to do about feu duties.

To add a personal word, when I first saw the new Clause I said to myself, "This will be interesting" and I was inclined to think that my hon. Friend was wrong. Having heard his views on the subject, and knowing a little about it myself, I have come to the conclusion that he was perfectly right, not necessarily on the point about what has happened in the past but on the broad question of how to treat this kind of payment. I hope that, in these circumstances, the Government will undertake to look at the matter again and let my hon. Friend know their decision as soon as possible so that he may revert to it on Report.

Mr. Green

The hon. and learned Member for Kettering (Mr. Mitchison) has made a fair point and with most of his remarks I could not agree more. I certainly would not set myself up to argue the intricacies of this matter. Indeed, this is probably an issue for the courts to decide.

I have offered to consider this matter and I can assure the hon. and learned Member for Kettering that I mean that offer. Although I said that the hon. Member's new Clause as drafted is technically defective, if he wishes to see me about those defects I will give him my poor but honest views in an effort to help him correct those technical defects. I cannot give any guarantees about him raising the matter on Report' because that is a question of selection, which is not my function. I should, however, make it clear that even if we can get over those defects I suspect that will not resolve the real argument as to whether or not this is rent.

If the hon. Member would like to ventilate the general argument again, I will do my best so to get, in technical terms, his Clause framed that the argument can be revived, if it is selected. I do not think that I could make a fairer offer than that, and I do make it.

2.0 a.m.

Mr. Callaghan

I do not wish to introduce a note of acerbity at this stage, but I hope that the Financial Secretary will not go on saying that he is not competent to argue these things; if he is not competent to do so, he should not be there. This is not a matter for the courts but a matter for Parliament, and the Financial Secretary ought to be willing to tell us what he thinks is a charge on income that should be allowed against Income Tax. If Parliament can abolish Schedule A, it can decide a question like this, and it is no use the Financial Secretary hiding behind the courts by saying it should be taken to the courts to see whether they think it is matter of rent or interest.

Parliament can say what it is, and it is absolutely wrong that we should be left in a situation which has developed mainly as a result of the abolition of Schedule A. People should not have to pay more tax because of that abolition—it is ridiculous. The hon. Gentleman should go back to the Treasury and say "This situation cannot be permitted to continue—we shall regard this as a charge on income." In that case, a new Clause could be framed, and the difficulty dealt with. That is what his duty is between now and Report.

Mr. Green

Perhaps I may add a word, as I have had this no doubt very agile political proposition put to me. May I point out to the hon. Gentleman that he is not talking about the same things that we have been talking about. If he wants to put down a new Clause that deletes rents, however defined by the courts—and I am sorry that he does not seem to like the courts very much in a matter of this kind; but when he reads what he has said I do not think that he will want to stick to it—a new Clause quite different in character from this one, which makes rent a charge against general income, he is welcome to do so. I do not know whether or not it would be selected, but, if it were selected, we would have a debate.

That is not what this is about. This is about feu duty in Scotland. I have offered to help his hon. Friend as best I may to bring this into discussion if the new Clause is again selected on Report, and I cannot now enter into a great discussion on what should or should not be chargeable to general income—because not only would rent be called into question but travel to work, and the rest. If the hon. Gentleman wants to put down a new Clause to cover those general matters—who am I to stop him framing it?

Mr. Mitchison

With respect, this is not a matter for the courts, and I cannot think why the hon. Gentleman should think that it is. The question is whether this form of charge, rent, interest—call it what we will—should or should not be a deduction from Income Tax. The Financial Secretary said, and it seems sense, that it should be decided on whether it is to be regarded as a charge to income or as a rent on land. So be it—but what court is to decide that? I should not have thought that to be a question that a court could decide. It must be a matter for Parliament.

Mr. Willis

We have had an interesting little debate, and I am grateful for the support of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) who, I think, summed up the matter and put his finger on the knub of the problem, which is: what exactly is feu duty, and what is its character? What I tried to argue—most inadequately, I admit—was that it was more in the nature of an interest payment—my hon. and learned Friend used some legal terminology about it which, I think, had the same meaning—than in the nature of a rent.

I also think, as I believe I said in my first speech, that this might have been the reason why, in practice in Scotland, no matter what the legal position was prior to 1940, or even after, it was allowed to be accepted as a general charge against income was the fact that it was generally recognised as an interest payment. It is an investment. The person who invests does nothing about it. He has no responsibility for anything. All he does is draw interest from the land.

I am grateful to the hon. Gentleman for his offer, of which I shall avail myself, to draft a new Clause for me, and I will put it down again. Of course, whether it will be discussed will be in the discretion of the Chair. In view of the offer which the hon. Gentleman has made, and in the hope that he will once again consider how a feu is regarded in Scotland and will consult the Scottish Law Officers, and to get their views, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.