§ The Solicitor-General
I beg to move, Amendment No. 22, in page 20, line 40, at the end to insert:being—Subsection (9) of the Clause defines "commercial rent" in respect of payments which are made but which are not rent, but which are related to rent charges and similar payments. In respect of such charges, commercial rent was defined as the rent which might be expected to be paid under a tenant's repairing lease, but it did not stipulate the term for the lease. 1308 It appears to be impracticable unless the term is stated, because the rent under a notional lease may vary widely.
- (a) where the period over which payments are to be made under that transaction is not less than 200 years, or the obligation to make such payments is perpetual, a lease for 200. years, and
- (b) where that period is less than 200 years, a lease which is of the same duration as that period".
Building leases, normally, are not for less than 99 years and, taking the life of a building at about 60 years, a term of about 120 to 150 years, which allows undeveloped land to be developed twice, will usually command the highest rent, while a term consistent with good estate management might give a rent for undeveloped land on a lease of 200 years. Thus the Amendment states that(a) where the period over which payments are to be made … is not less than 200 years, or the obligation to make such payments is perpetual …then the notional lease is to be taken to be one of 200 years.
The term of 200 years corresponds to a perpetual rent charge because there is no residue. The Amendment also states that where the period is below 200 years, the commercial rent is to be the rent under a tenant's repairing lease for the same duration as the payments.
This period of 200 years arouses comment on the benches opposite, but I can assure hon. Members that it is consistent with good estate management, giving the best rent for undeveloped land, and it is for that purpose that it is thought right to insert this Amendment into this tax-avoidance Clause.
§ Mr. Callaghan
Even at this late hour, I must point out that this is a purely artificial concept which bears no relationship to reality. History does not bear out what the Solicitor-General says. For example, to go back 200 years, according to the right hon. and learned Gentleman, someone during the reign of George III—I think between 1760 and 1820—said, "If history is to be our guide, by the year 1964 I shall have got the maximum and proper rental out of my undeveloped land." What absolute rubbish! Nobody said that in 1764 and nobody can say today what is exactly right in this case. It is artificial and bears no relationship to reality.
However, because I cannot suggest a figure with any more certainty than the Solicitor-General, I suppose that we had better accept this.
§ Amendment agreed to.