HC Deb 07 July 1965 vol 715 cc1755-77
Mr. MacDermot

I beg to move, in page 38, line 9, at end insert:

Class 4


Would it be convenient to discuss with this Amendment the next three Amendments, No. 71, No. 72 and No. 73, which all deal with amendments to provisions in Clause 31 relating to the transfer of business assets?

Mr. Deputy-Speaker (Sir Samuel Storey)

Amendment No. 71 is already selected for discussion with Amendments No. 310, No. 311 and No. 74.

Mr. MacDermot

This Amendment again flows from our discussions in Committee when I was pressed by hon. Member's on both sides of the House to extend the class of assets which are entitled to the benefit of deferment from liability to capital gains on the transfer of the business to include goodwill.

This affects a number of people for whom hon. Member's were concerned. It included in particular small shopkeepers, and it included insurance agents with their special problem relating to their agent's books. We looked at this problem and decided that there was no solution to it short of a general provision to create a new class of asset which would qualify for this deferment relief, a comprehensive class of asset constituting goodwill. That is what we have done in this Amendment. It will, I think, include all the types of cases which hon. Member's had in mind during our discussion in Committee, and I hope it will commend itself to the House.

11.15 p.m.

Mr. Peter Walker

I apologise for not being in my place when the Financial Secretary moved the Amendment, which, of course, my hon. Friends and I obviously welcome. We are delighted to see the Amendment in its entirety, every word of it, as originally proposed in Committee by my hon. Friends. We are delighted at the rapid conversion not just of the Financial Secretary but of all those hon. Gentlemen opposite who trundled into the Division Lobby to oppose the Amendment when it was first proposed in Committee. Not only did hon. Gentlemen opposite trundle into the Lobby to oppose it, they were led in by the right hon. Gentleman the Prime Minister.

As I say, we welcome the conversion of hon. Gentlemen opposite. That applies not only to the Financial Secretary and the other Members of the Treasury Bench but seemingly the whole of the Parliamentary Labour Party. Thirty-six days ago hon. Gentlemen opposite decided that this was a bad Amendment. Thirty-six days later they all, every one of them, accept that it is a good Amendment.

Mr. MacDermot

If the hon. Gentleman wishes to be up to his usual standards of fairness he might care to recollect that we did not say that it was a bad Amendment but that we wanted to consider the matter. On that occasion hon. Gentlemen opposite were so impatient that they did not want to allow us time in which to consider it.

Mr. Walker

It would not be fair to the hon. and learned Gentleman to suggest that he did not put any arguments against the Amendment. He put some cogent arguments, although I am sure he will agree that one could not argue that it was a complicated Amendment or that it contained a great deal of complicated legal wording which had to be further considered with the Treasury lawyers. After all, so reasonable was it that it merely sought to insert the word "Goodwill".

The Amendment was on the Order Paper for several weeks before it came before the Committee. Yet at the end of the consideration which the Financial Secretary must have given to it, he told the Committee—having given various reasons why goodwill of this sort should be subject to the Capital Gains Tax and should not be allowed to be transferred and so on—that so difficult was goodwill to define that the Amendment should not be accepted. In spite of various hon. Gentlemen opposite pointing out that the hon. and learned Gentleman had nothing to lose in accepting the Amendment, he recommended the Committee not to accept it. Fortunately, on behalf of those concerned we decided to press the matter to a division.

It is remarkable that within only 36 days, presumably without there having been a general distribution throughout the Parliamentary Labour Party of the arguments which have changed the mind of the Financial Secretary, there has been a mass conversion on the benches opposite. It is surprising that of the scores of hon. Gentlemen opposite who voted against the Amendment, not one has come forward still retaining his original view about it. Not even the Prime Minister has come along to express his view about it, although it would be a refreshing change to see the right hon. Gentleman here during our deliberations on this so-called reforming Finance Bill.

This is an important Amendment. Had it not been included it would have meant that many small business people throughout the country, on transferring from one location to another, would have been considerably penalised for the goodwill which they had established in their previous businesses. It would also have meant that many hundreds of insurance agents would have been caught fully by the Capital Gains Tax provisions. We are, therefore, pleased that within the short period of a month we have achieved the complete conversion of the party opposite so that the Government have moved the Amendment.

Amendment agreed to.

Mr. Peter Walker

I beg to move Amendment No. 125, in page 38, line 9, after the words last inserted, to insert "Class 4. Sportsmen."

This very simple and straightforward Amendment relates to the transfer fees of football players. We presume that if at certain times certain football clubs obtain transfer fees on a football player they would have to pay Gapital Gains Tax on them but if a club then spent the money on purchasing another player it would be an obvious case of transfer of a business asset. Therefore, in the interests of the football clubs, and with the Minister of Sport enthusiastically supporting the Amendment, as we are quite sure he is, I am certain that I have only to sit down for the Financial Secretary to accept the Amendment.

Mr. MacDermot

I always thought that hon. Members opposite had a tendency to a somewhat feudal outlook, but I see that on this occasion they have gone even further and have got the slave mentality. They seem to think that a footballer is the property of the football club. [HON. MEMBERS: "So he is."] I can assure them that that is not so. The footballer is not an asset. His ownership is not vested in the football club. What the football club has is a contractual right to certain of his services on the football field. I am afraid, therefore, that the Amendment is meaningless, which is the first reason—which hon. Members opposite will no doubt find a somewhat technical argument—for my rejecting the Amendment.

Perhaps I may be allowed now to address myself to what I conceive to be the meaning they intended to convey. In all the cases where we have been able to check, the cost of the so-called "buying" of the player—and this applies in cricket as well—is treated as an expense in computing the profits, if such there be, of the club, and receipts are included in profits, so that the whole transaction is outside the scope of the Capital Gains Tax. For that additional reason, I hope that hon. Members will not find it necessary to press their Amendment to a Division.

Mr. Peter Walker

We have made inquiries into this aspect, and I gather that the situation could arise in which this fee would not be treated as a revenue item but could be treated as a capital item. Would the hon. and learned Gentleman care to comment on the supposition that with certain clubs these contractual rights could be counted for accountancy purposes? I gather that that particularly applies to a club in, perhaps, the Southern League that seldom transfers players, or an amateur club that does not make a custom of transferring players, and that the fee could become a capital payment in some circumstances.

I think I heard the Minister for Sport briefing the hon. and learned Financial Secretary on this point, but I am not talking of amateur clubs. In the Southern League there are professional clubs which only occasionally dispose of a player, and very seldom buy one. I gather that, occasionally, such a transfer fee could be treated as a capital item. I should have thought that, by the nature of Clause 31, if the money was expended on another player, the Minister would not wish to tax it, but if he suggests that this would become a capital item, perhaps the interpretation of Amendment No. 70 could be so extended as to cover this point.

Sir D. Glover

I intervene on this Amendment because I hope that the Government are right in their interpretation. I happen to be the chairman of the anti-slavery society and take a very strong view of the suggestion that a football club has a title or lien on the body of a player. I understood that when a club buys a player it buys his ability as a footballer and does not buy anything else. Therefore, the club is buying only his particular skill and not creating any form of slavery and has no right to any other activity than football in the transfer fee. I think the Financial Secretary expressed what I understood the position to be. I shall be grateful for confirmation so that I shall not have to start a campaign against slavery by football clubs.

Amendment negatived.

Mr. MacDermot

I beg to move Amendment No. 71, in page 38, line 27, at the end to insert: (9) This section shall apply in relation to a person who, either successively or at the same time, carries on two trades which are in different localities, but which are concerned with goods or services of the same kind, as if, in relation to old assets used for the purposes of the one trade and new assets used for the purposes of the other trade, the two trades were the same trade.

Mr. Deputy-Speaker

We can discuss with this Amendment the Amendment to the Amendment at the end insert: and in this respect and for all the purposes of this section agriculture, horticulture and forestry shall be held to be concerned with goods and services of the same kind. Amendment No. 310, in page 38, leave out line 35.

Amendment No. 311, in line 36, at end insert: and (d) in relation to the management by by the owner thereof of an estate which consists principally of agricultural land as defined in section 315 of the Income Tax Act 1952. Amendment No. 74, in page 39, line 7, at end insert: (12) For the purposes of this section all forms of retail sales shall be considered to be one trade.

Mr. MacDermot

May we also include Amendment No. 72, in page 38, line 36, leave out "or vocation" and insert "vocation, office or employment"; and

Amendment No. 73, in line 38, leave out "and 'vocation'" and insert "'vocation', 'office' and 'employment'."

Mr. Deputy-Speaker

If that is convenient to the House, certainly.

Mr. MacDermot

Amendment No. 71 extends the scope of the term "trade" for the purposes, and only for the purposes of Clause 31. This problem came to light as a result of a remark I make in Committee when I went rather wider than was justified. Apparently the term "trade" has a somewhat restricted meaning under the Income Tax Acts, a more restricted meaning than I appreciated at the time. For the purposes of the Revenue practice based on decided cases in Income Tax law, there is one continuing trade only if both before the disposal of the old assets and after the acquisition of new ones a person is carrying on the same kind of trade, using the same organisation and the same sources of supply and dealing with the same customers.

The difficulty which arises is that if a trader was trading in one town and then sold his shop and bought precisely the same kind of shop in another town with a different lot of customers, under existing tax law he would not be carrying on the same trade. What we have done is to extend the scope of this term solely for these purposes so that "trade" will include the carrying on of the same kind of business in a different place and with different customers.

Amendments No. 72 and 73 would have the effect that Clause 31 applies, with any necessary modifications to offices and employments, as it does to trades, professions or vocations. The specific purpose is to deal with the case of insurance agents who, while being employed persons, have the right to sell their insurance books in whole or in part with the consent of their employers. This ensures that the goodwill provision which the House has accepted will extend to the case of the insurance agent.

Sir M. Redmayne

I speak briefly, not on the particular point made by the Financial Secretary, but on my Amendment to the Chancellor's Amendment, which I put down to try to get on the record and perhaps to correct a situation which arises from what was, of course, an unintentional misleading answer given by the Financial Secretary in the debate on the Motion that Clause 31 should stand part of the Bill, for which he apologised in a letter to my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins) on 3rd July.

11.30 p.m.

On Clause 31 he had been asked whether the word "trade" included horticulture, agriculture and forestry, and in reply he said: As I understand it, for these purposes all branches of agriculture are treated as the same. It would be all forms of farming, including horticulture and forestry. Very wide switching of activities, as it were, will still enjoy the benefit of Clause 31."—[OFFICIAL REPORT, 31st May, 1965; Vol. 713, c. 1219.] In his letter he admitted that this was an exaggeration of the situation, and I think it would be an advantage to put on the record some of the points that he made in that letter. He confirmed—and this is important because it has caused some misunderstanding—that both horticulture and forestry, and of course agriculture, are trades for the purposes of Clause 31 and would, therefore, qualify for the deferment of Capital Gains Tax, each in its own right. He also confirmed that it is right to say that the trade of agriculture is a very wide one and would include different types of farming. For example, dairy farming and arable farming would be exchangeable one with the other for the purposes of this Clause, and he also made the point that farming is a special case under the Income Tax Act, 1952, in that all farming carried on by any particular person or partnership or body of persons is treated as one trade, wherever it may be carried on.

All those are good points. However, in this letter to which I have referred the Financial Secretary says that farming for the purposes of this Clause does not include horticulture or forestry, and so a person could not switch". in reinvesting his assets— from farming to horticulture or forestry and remain within the same trade … for the purposes of this Clause, as he had originally suggested. He continues: I imagine that would be very unusual for anybody in farming to wish to make such a change … I suggest that he is quite wrong, that it is not unusual, and furthermore is likely to become even more usual that it has been.

If the hon. and learned Gentleman will refer the matter to his right hon. Friend the Minister of Agriculture or, indeed, seek any informed opinion on this subject he will find that land policy and farming policy, of any Government, is very likely to promote such switching, particularly from farming to forestry, in order to make use of land which is not of the highest quality for farming, and I think that as the years go by the policy will increasingly be to see that land which is at present farmed in too small parcels to be efficient will be given to horticulture.

I do not know if the Financial Secretary will accept the Amendment, but it is important that we should have some statement to guide us. The definition of "agriculture" in the Agricultural Holdings Act, 1948, includes horticulture. I will not quote that definition, with which I am sure he is fully familiar. Therefore, there would seem to be very little reason why agriculture and horticulture should not be interchangeable for the purpose of reinvesting under the terms of this Clause. The interchangeability of forestry is not, so far as I can find, met by any similar definition in the law as it stands, but I ask the Financial Secretary to accept that it would be a most useful act of policy that these three should be interchangeable within the sense of the Clause, and to seek some means by which this can be achieved.

Sir D. Glover

I should like to support the Amendment to the proposed Amendment for a very definite reason. In my constituency there are a lot of horticultural holdings and a lot of medium-sized farms, and the farms are getting bigger. If the Financial Secretary would tour my constituency he would realise the narrow difference between what is known as a horticultural holding and an agricultural holding. They grow virtually the same produce. Surely in all common sense they should be grouped together, although I know that the situation is different from that in the eastern counties. The farmers in my constituency do not like me to refer to them as large horticulturists. They like to be referred to as farmers. A great many of them are carrying on virtually the same rôle. There are some agricultural holdings of three or four acres and next door there are agricultural holdings three, four or five times as big but which are carrying on the same operations. I therefore hope that the Financial Secretary will be able to accept the Amendment to his Amendment.

Mr. MacDermot

May I thank the right hon. Gentleman the Member for Rushcliffe (Sir M. Redmayne) for giving me this opportunity to correct a slip which I made during our discussions in Committee? I entirely confirm all that he has stated so carefully as the true position and I will not weary the House by repeating it. However, there is one addition that I would make to what he has said which to some extent deals with the point just made by the hon. Member for Ormskirk (Sir D. Glover). Although agriculture, horticulture and forestry are themselves different trades, a particular individual may carry on two or even three of these activities together, at the same time, as one trade, in the same way as may be done in other fields of business. If he is a trader carrying on in that way a mixed trade, he would enjoy the benefit of the Clause if he transferred and carried on again a mixed trade or one of the activities which he had been doing previously.

I have been asked if I can accept the Amendment to the proposed Amendment as it stands, but I am afraid I cannot for this reason. We will be coming to another Amendment in which we are invited to extend the provisions of Clause 31 so that, in effect, anyone carrying on one trade of any kind can transfer the assets to a completely different trade and enjoy the benefit of Clause 31. This would open up such wide possibilities of switching where investment is in the form of a business that it would lead to endless deferring of liabilities to tax and it is one which we could not accept. The agricultural community is fortunate in having a very wide definition of the trade of agriculture which enables it to enjoy a wide degree of switching which might be denied to people in other spheres. I would remind the House that the object of this Clause is to see that the provisions of the Capital Gains Tax do not operate as a bar to the kind of redeployment of industry which we all want to see.

The right hon. Gentleman urged an economic argument in support of his Amendment and has asked me to consult with the Minister of Agriculture about this aspect of the matter. That I will gladly undertake to do, but for the reasons I have stated I cannot advise the House to accept the Amendment to the Amendment.

The Earl of Dalkeith (Edinburgh, North)

Amendments Nos. 310 and 311, which stand in my name, cover a point slightly different from that raised in the Amendment in the name of my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne). These Amendments might have been tabled for discussion at an earlier stage but interpretation of the Bill is not altogether easy on this point and it was only after the Committee stage that the problems involved became fully apparent. I raise this matter partly because of my interest in it, which I declare, and which I believe qualifies me to speak on it with some knowledge and conviction, and partly because my Amendments seek to put right a wrong which I believe the Government would wish to put right.

It is a fairly technical matter which I assume must have been overlooked by accident rather than intent. I have some confidence therefore that the Financial Secretary will want to accept the Amendments after hearing my brief explanation.

A great part of our small island comprises hill and marginal land. Anyone who has studied the problems of land use will surely agree that it is here that there is the greatest scope for the development and improvement of productivity to the short-term and long-term economic advantage of the country.

I am sure that the Minister of Land and Natural Resources, who was present a short while ago, and the Secretary of State for Scotland, would endorse my submission that the land generally, and these areas in particular, could be and should be more fully developed than they are at present. A great many reports and inquiries by expert bodies as well as by politicians have urged strongly that more should be done, especially by owners of estates, to carry out further development. But the essential point, which is so often overlooked, is that the main limitation to the progress which everybody wants to see and agrees is desirable is the shortage of capital.

One does not have to look far to see the reason for this. It is that during the last 20 to 30 years—and this is particularly true of estates comprising mainly of hill and marginal land—the cost of maintenance of the fixed equipment has risen very much faster than income from rents. This means that it has been barely possible to keep pace with normal maintenance obligations, let alone carry out the improvement to and modernising of fixed equipment such as roads, bridges, drainage, river banking, flood prevention, housing, shelter plantations and all the rest. As a result, it has become in recent years the practice for the more progressive owners of estates to raise the necessary capital for this kind of modernisation and improvement by occasionally selling a farm.

In this context, contrary to the popular belief that because ordinary building land is worth and sells at between £5,000 and £20,000 an acre, all land must therefore be immensely valuable, the greater part of upland farmland has probably a market value of between £5 and £50 an acre. This means that the 50,000-acre estate which is often sneered at can well be of lesser value than a sweet shop in Bond Street and will yield a much smaller return.

11.45 p.m.

In the unfortunate absence of adequate rent income on an estate, the practice of selling a farm in order to raise improvement capital is one which all progressive-minded people would surely wish to encourage. The Bill as it stands will do exactly the reverse, actively encouraging bad estate management instead of good. Not only will it deter an owner from selling a farm for the specific reasons I have given and thus slow down the process of improvement investment but it will be an incitement to him to hold on to farms which he might otherwise sell and milk them of their natural capital appreciation by neglecting his maintenance obligations and extracting maximum rents. This will be bad for the farming community and the country as a whole, and it will slow down the trend towards an increasing proportion of owner-occupation in farming, a trend which, I had thought, hon. Members opposite wished particularly to encourage.

I am sure that these consequences are not deliberately intended by the Government. It seems illogical to defer payment of Capital Gains Tax when the proceeds of a farm sale are reinvested in another farm but not to do so when the proceeds are used for good estate management by investing them in the improvement of other farms.

Acceptance of the Amendments would not necessarily cost the Government a penny. When a farm sale does not take place as a result of the Bill, no question of Capital Gains Tax will arise. The only effect of the Bill, unchanged by these Amendments, will be to contribute to the impoverishment of our natural resources at a time when everything possible ought to be done to stimulate greater productivity on the land, to reduce our dependence on imports and to assist our balance of payments. I hope, therefore, that the Financial Secretary will show how enlightened he is by accepting these Amendments, which, I am sure, he will find irresistible.

Mr. Scott-Hopkins

The Financial Secretary's reply to my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne) was extremely disappointing. He seemed to base his whole argument on Amendment No. 74. That is an entirely separate matter. My right hon. Friend's Amendment is drawn very narrowly, and the Financial Secretary ought to realise that an ability to switch between horticulture, forestry and agriculture, if need requires, is essential to the countryside and to those who are engaged in farming of any kind. I hope that he will reconsider his decision not to accept my right hon. Friend's Amendment because it is vital that it should be possible to switch between these different types of farming which go hand in hand.

Mr. Peter Walker

I was shocked by the Financial Secretary's observation, in arguing against acceptance of the Amendment spoken to by my right hon. Friend the Member for Rushcliffe (Sir M. Redmayne), that Amendment No. 74—I presume that that is the one he meant—was so wide as to be unacceptable. If that is what he meant, I can only express sincere regret that the Government have determined not to accept the proposition that, for the purposes of Clause 31, all forms of retail outlet or shop should be regarded as one trade. We are not suggesting any relaxation of the Capital Gains Tax in this respect, because Clause 31 applies only to defer liability to tax. But the Government, apparently, insist that Clause 31 shall not apply to the case of a grocer who, for instance, decides to sell his business in order to become the proprietor of a sweet shop or sweet and confectionery shop.

I cannot believe that the Government want to be so strict on the interpretation of Clause 31 as to say that a genuine transfer from one form of retailing to another should not enjoy the benefit of the Clause. Surely the House will agree that the basic skills involved in being a retailer are very similar. In the case I quoted of a grocer becoming the proprietor of a sweet and confectionery shop, the skills required are almost identical. He is for all practical purposes continuing the same trade and type of activity. Take the case of someone with a clothing shop who decides to buy a shoe shop. There are many similar examples. There is a tremendous identity of the types of skill involved in any form of retail outlet.

It will be against the whole spirit of the Clause if the Government stick rigidly to the definition that if one is to move from one shop to another an identical type of product must be sold in the shops. It is unreasonable. It has caused a great deal of consternation and anxiety among various organisations representing the retail traders. The Amendment would cost the Government nothing. It would eliminate what would otherwise be a considerable hardship on a retailer deciding to change the nature of the products he will sell. I should have thought it was an Amendment which the Government could readily have accepted. We consider this of such importance that I shall certainly urge my hon. Friends to divide the House if the Government do not accept it.

Mr. J. E. B. Hill (Norfolk, South)

I want briefly to mention a class of persons who reduce the Clause as it stands, with the Government Amendment, to absurdity—sub-postmasters, of whom there are 23,000. They are hard to recruit, and their Post Office salary does not of itself usually provide a livelihood, so that the sub-postmastership, which is an appointment and not a trade, is linked to some ancillary retail business.

If the sub-postmaster wishes to go up in his employment, he may in moving from a larger sub-postmastership, have to change to a different ancillary business, say from a tobacconist's to a sweet shop. As the Clause stands, and as the Financial Secretary has been good enough to tell me in correspondence, the sub-postmaster seeking to move may be penalised by the incidence of the Capital Gains Tax, so much so as to make a move unremunerative.

Some sub-postmasters are in a happy position, particularly in rural constituencies, because their business will be linked to a general village store, but some of their colleagues may find themselves caught by the tax at the very moment when they want to move up in their careers. I therefore ask the Financial Secretary for this very limited purpose to consider that the small retail businesses should be one trade for the purpose of this tax.

Mr. David Mitchell (Basingstoke)

I represent a constituency which has two expanded towns in it—Basingstoke and Andover. There is a tremendous need, with the incoming population, to bring in more shopkeepers. I very much fear that the Clause will reduce the number of shopkeepers who will move from one form of shopkeeping to another.

After all, the skill which is required to be a shopkeeper is very much the same whatever one's actual business—in buying one's goods, stocking them, taking care of them, building up custom, selling them and delivering them to one's customers. I cannot see that the skill required is very different. I should have thought that in as much as the Financial Secretary accepts that husbandry is a profession, whatever part it takes, equally one should accept that a shopkeeper is a shopkeeper whether he is selling grocery, shoes or whatever it may be.

I know that the Chancellor would wish his Bill to have a large measure of logic and common sense in it. [HON. MEMBERS: "Oh."] I ask him simply, where is the logic and common sense about this?

How does he justify the following? A market gardener who grows and sells vegetables can become a pig farmer, but a greengrocer who sells vegetables cannot become a pork butcher. What is the logic in that?

Hon. Members


Mr. MacDermot

Will the hon. Gentleman give way? I am being asked to answer. His hypothesis is wrong—[HON. MEMBERS: "Why?"]—because a horticulturist cannot transfer in the way the hon. Gentleman suggests without transferring to a different trade.

Mr. Mitchell

But when I raised this in Committee I was quite clearly told by the Financial Secretary that a market gardener could transfer to poultry farming. If he likes to look up the record he will find that he made it quite clear that husbandry was a trade.

Mr. MacDermot

If the hon. Gentleman had been present in the House when we were discussing this group of Amendments earlier he would have heard his right hon. Friend explain that I had corrected that mis-statement in a letter and that one of the right hon. Gentleman's reasons for moving the Amendment was to enable that correction to be made clear to the House.

Mr. Mitchell

I am very grateful for that clarification, but would the hon. and learned Gentleman, then, clarify and show the logic of this, that an arable farmer growing corn can become a poultry farmer, but a baker selling corn is not allowed to become the village grocer? What is the logic of that? I will very readily give way to the hon. and learned Gentleman to hear his reply. What about the dairy farmer who can, presumably, become a flower grower, while the dairyman cannot become a florist? Where is the logic? An export merchant can become an import merchant, presumably to the disadvantage of the balance of payments, but on the other hand a distributor of imported German goods cannot become a producer of precision engineering goods for export. What is the common sense? What is the logic? We have not had the Chancellor or the Financial Secretary explain that.

I think that we should have some logic put into this, and I would, with great respect, suggest that our Amendment regarding retailers ought to be accepted by the Government in view of the fact that the skill which is required is the same skill although the goods to be sold may be different.

Mr. MacDermot

I can assure the hon. Gentleman that we do not want to do anything to prevent a pig farmer from being a butcher, a baker or a candlestick maker, or, as one of my hon. Friends suggested, a ballet dancer, if he wants to, but if he does so he will cease to be carrying on the same trade. I was asked to explain the logic behind it. The logic behind it is that this is a Clause dealing with the transfer of business of a person who is carrying on the same trade. What we are being asked and pressed to do, as we are on every occasion whenever any sort of concession is granted, is immediately to extend it. Then we are asked what the principle is. I am telling hon. Members what the principle is. Because they are seeking by their Amendment to extend beyond the principle, we cannot accept the Amendment.

The effect of this extension they are suggesting amounts to saying that in the case of a man who is in business no Capital Gains Tax ought to be payable on realised gains unless the money is withdrawn from the sphere of business altogether, or, failing that, till the trader in question dies.

12 m.

That is not what we envisage to be the scope or purpose of the Clause which, as I have repeatedly said, is intended to ensure that the operation of this tax will not serve to prevent that kind of redeployment of industry. It is concerned primarily with the redeployment of industry, and with it other commercial and business activities, to ensure that there is what we all want to see, the full development of the resources of the different areas of the country. It is not intended as a means of enabling a person who ceases to carry on a trade to realise the assets of that trade and then to reinvest them in some other without being liable for tax on such capital gains as he may have made in the first trade.

The hon. Member for Edinburgh, North (The Earl of Dalkeith) sought to widen the matter still further by taking it out of the sphere of trade altogether and asking that the same kind of privilege should be extended to a property owner who is managing an estate and who is not carrying on any kind of business. This would lead us even further away from what is the underlying purpose and principle of the Clause, and I must therefore advise my hon. Friends to reject the Amendment.

Mr. Heath

It is quite clear that the whole House is thoroughly dissatisfied with the Financial Secretary's answer. I have been watching the faces of hon. Ladies and Gentlemen opposite, some of whom have had much experience in these matters, and they are obviously giving no support whatever to the hon. and learned Gentleman who has given us a circular argument that because the Clause is limited in the way that he described, it ought to remain limited and not be widened. This does not seem to be a very powerful argument.

We have had a number of contributions which have completely undermined the hon. and learned Gentleman's position. We had a contribution from my hon. Friend the Member for Basingstoke (Mr. Mitchell), who, as the House recognises, is both persuasive and intelligent, but, if I may say so, he based his argument on one great fallacy. As he has been in the House for only a limited time, perhaps this is pardonable. The fallacy is that the Labour Government and the Financial Secretary in particular are as intelligent and as logical as he is. The Financial Secretary immediately leapt to his feet and denied this proposition and pointed out that he was refusing to be logical because he did not want to widen the Clause.

It is apparent to us all that the sensible thing to do in this case is to adopt Amendment No. 74, which would embody my right hon. Friend's Amendment, and to allow those who want to change in the retail trade to do so. This is the obvious, sensible thing to do, and it could not involve any abuse. I believe that the Financial Secretary recognises this, and certainly the Chancellor does. Against this brick wall of failure of comprehension, we have no alternative but to divide the House.

I notice that tonight the Treasury Bench is much better equipped for this performance. It is true that the Prime Minister is not here, but the Leader of the House is. He is waiting there ready to advise his right hon. Friend the Chancellor what to say in the event of another defeat. A few minutes ago the Secretary of State for Education and Science was present, presumably to advise the right hon. Gentleman on the good English in which to put the phrase, or even possibly to step into the Chancellor's shoes—we do not know. We also have the Minister for Sport present to advise the right hon. Gentleman which way to make a dash for it when it all happens. Rather than make all these elaborate preparations at the hour of midnight, would not it be better to be sensible and to accept the Amendment? If they cannot do so, we must divide the House.

Amendment agreed to.

Further Amendments made: In line 36, leave out "or vocation" and insert "vocation, office or employment".

In line 38, leave out "'and vocation'" and insert "'vocation', 'office' and 'employment'".—[Mr. MacDermot.]

Amendment proposed, In page 39, line 7, at end insert: (12) For the purposes of this section all forms of retail sales shall be considered to be one trade.—[Mr. Peter Walker.]

Question put, That those words be there inserted in the Bill:—

The House divided: Ayes 270, Noes 276.

Division No. 244.] AYES [12.8 a.m.
Agnew, Commander Sir Peter Astor, John Barlow, Sir John
Alison, Michael (Barkston Ash) Atkins, Humphrey Batsford, Brian
Allan, Robert (Paddington, S.) Awdry, Daniel Bell, Ronald
Allason, James (Hemel Hempstead) Baker, W. H. K. Bennett, Sir Frederic (Torquay)
Amery, Rt. Hn. Julian Balniel, Lord Berkeley, Humphry
Anstruther-Gray, Rt. Hn. Sir W. Barber, Rt. Hn. Anthony Berry, Hn. Anthony
Biffen, John Grimond, Rt. Hn. J. Nicholson, Sir Godfrey
Biggs-Davison, John Gurden, Harold Noble, Rt. Hn. Michael
Birch, Rt. Hn. Nigel Hall, John (Wycombe) Nugent, Rt. Hn. Sir Richard
Black, Sir Cyril Hall-Davis, A. G. F. Onslow, Cranley
Blaker, Peter Hamilton, Marquess of (Fermanagh) Orr, Capt. L. P. S.
Bossom, Hn. Clive Hamilton, M. (Salisbury) Orr-Ewing, Sir Ian
Bowen, Roderic (Cardigan) Harris, Frederic (Croydon, N.W.) Osborne, Sir Cyril (Louth)
Box, Donald Harris, Reader (Heston) Page, John (Harrow, W.)
Boyd-Carpenter, Rt. Hn. J. Harrison, Brian (Maldon) Page, R. Graham (Crosby)
Boyle, Rt. Hn. Sir Edward Harvey, John (Walthamstow, E.) Pearson, Sir Frank (Clitheroe)
Braine, Bernard Harvie Anderson, Miss Peel, John
Brewis, John Hastings, Stephen Percival, Ian
Brinton, Sir Tatton Hawkins, Paul Peyton, John
Brooke, Rt. Hn. Henry Hay, John Pickthorn, Rt. Hn. Sir Kenneth
Brown, Sir Edward (Bath) Heald, Rt. Hn. Sir Lionel Pike, Miss Mervyn
Bruce-Gardyne, J. Heath, Rt. Hn. Edward Pitt, Dame Edith
Bryan, Paul Hendry, Forbes Pounder, Rafton
Buchanan-Smith, Alick Higgins, Terence L. Powell, Rt. Hn. J. Enoch
Buck, Antony Hill, J. E. B. (S. Norfolk) Price, David (Eastleigh)
Bullus, Sir Eric Hirst, Geoffrey Prior, J. M. L.
Burden, F. A. Hobson, Rt. Hn. Sir John Quennell, Miss J. M.
Butcher, Sir Herbert Hooson, H. E. Ramsden, Rt. Hn. James
Buxton, Ronald Hopkins, Alan Redmayne, Rt. Hn. Sir Martin
Campbell, Gordon Hordern, Peter Rees-Davies, W. R.
Carlisle, Mark Hornby, Richard Renton, Rt. Hn. Sir David
Carr, Rt. Hn. Robert Hornsby-Smith, Rt. Hn. Dame P. Ridsdale, Julian
Cary, Sir Robert Hunt, John (Bromley) Roberts, Sir Peter (Heeley)
Channon, H. P. G. Hutchison, Michael Clark Rodgers, Sir John (Sevenoaks)
Chataway, Christopher Iremonger, T. L. Roots, William
Chichester-Clark, R. Irvine, Bryant Godman (Rye) Royle, Anthony
Clark, Henry (Antrim, N.) Jenkin, Patrick (Woodford) St. John-Stevas, Norman
Clark, William (Nottingham, S.) Jennings, J. C. Sandys, Rt. Hn. D.
Clarke, Brig. Terence (Portsmth, W.) Johnson Smith, G. (East Grinstead) Scott-Hopkins, James
Cole, Norman Jones, Arthur (Northants, S.) Sharples, Richard
Cooke, Robert Jopling, Michael Sinclair, Sir George
Cooper, A. E. Joseph, Rt. Hn. Sir Keith Smith, Dudley (Br'ntf'd & Chiswick)
Cooper-Key, Sir Neill Kaberry, Sir Donald Smyth, Rt. Hn. Brig. Sir John
Cordle, John Kerby, Capt. Henry Soames, Rt. Hn. Christopher
Corfield, F. V. Kerr, Sir Hamilton (Cambridge) Spearman, Sir Alexander
Costain, A. P. Kilfedder, James A. Speir, Sir Rupert
Courtney, Cdr. Anthony Kimball, Marcus Stainton, Keith
Craddock, Sir Beresford (Spelthorne) King, Evelyn (Dorset, S.) Stanley, Hn. Richard
Crawley, Aidan Kirk, Peter Steel, David (Roxburgh)
Crosthwaite-Eyre, Col. Sir Oliver Kitson, Timothy Stodart, Anthony
Crowder, F. P. Lagden, Godfrey Studholme, Sir Henry
Curran, Charles Lambton, Viscount Talbot, John E.
Currie, G. B. H. Lancaster, Col. C. G. Taylor, Sir Charles (Eastbourne)
Dalkeith, Earl of Langford-Holt, Sir John Taylor, Edward M. (G'gow, Cathcart)
Dance, James Legge-Bourke, Sir Harry Teeling, Sir William
Davies, Dr. Wyndham (Perry Barr) Lewis, Kenneth (Rutland) Temple, John M.
d'Avigdor-Goldsmid, Sir Henry Litchfield, Capt. John Thatcher, Mrs. Margaret
Dean, Paul Lloyd, Rt. Hn. Geoffrey (Sut'n C'dfield) Thomas, Sir Leslie (Canterbury)
Digby, Simon Wingfield Lloyd, Ian (P'tsm'th, Langstone) Thompson, Sir Richard (Croydon, S.)
Dodds-Parker, Douglas Longden, Gilbert Thorpe, Jeremy
Doughty, Charles Loveys, Walter H. Tiley, Arthur (Bradford, W.)
Drayson, G. B. Lubbock, Eric Tilney, John (Wavertree)
du Cann, Rt. Hn. Edward McAdden, Sir Stephen Turton, Rt. Hn. R. H.
Eden, Sir John Mackenzie, Alasdair (Ross & Crom'ty) van Straubenzee, W. R.
Elliot, Capt. Walter (Carshalton) Mackie, George Y. (C'ness & S'land) Vaughan-Morgan, Rt. Hn. Sir John
Elliott, R. W. (N'c'tle-upon-Tyne, N.) McLaren, Martin Vickers, Dame Joan
Emery, Peter Maclean, Sir Fitzroy Walder, David (High Peak)
Eyre, Reginald Macleod, Rt. Hn. Iain Walker, Peter (Worcester)
Farr, John McMaster, Stanley Walker-Smith, Rt. Hn. Sir Derek
Fell, Anthony McNair-Wilson, Patrick Wall, Patrick
Fisher, Nigel Maginnis, John E. Walters, Dennis
Fletcher-Cooke, Charles (Darwen) Marples, Rt. Hn. Ernest Ward, Dame Irene
Fletcher-Cooke, Sir John (S'pton) Marten, Neil Weatherill, Bernard
Foster, Sir John Mathew, Robert Webster, David
Fraser, Rt. Hn. Hugh (St'fford & Stone) Maude, Angus Wells, John (Maidstone)
Fraser, Ian (Plymouth, Sutton) Maudling, Rt. Hn. Reginald Whitelaw, William
Galbraith, Hn. T. G. D. Mawby, Ray Williams, Sir Rolf Dudley (Exeter)
Gammans, Lady Maxwell-Hyslop, R. J. Wills, Sir Gerald (Bridgwater)
Giles, Rear-Admiral Morgan Maydon, Lt.-Cmdr. S. L. C. Wilson, Geoffrey (Truro)
Gilmour, Ian (Norfolk, Central) Meyer, Sir Anthony Wise, A. R.
Gilmour, Sir John (East Fife) Mills, Peter (Torrington) Wolrige-Gordon, Patrick
Glover, Sir Douglas Mills, Stratton (Belfast, N.) Wood, Rt. Hn. Richard
Godber, Rt. Hn. J. B. Miscampbell, Norman Woodhouse, Hn. Christopher
Goodhart, Philip Mitchell, David Wylie, N. R.
Gower, Raymond Monro, Hector Yates, William (The Wrekin)
Grant, Anthony More, Jasper Younger, Hn. George
Grant-Ferris, R. Morrison, Charles (Devizes)
Gresham Cooke, R. Mott-Radclyffe, Sir Charles TELLERS FOR THE AYES:
Grieve, Percy Munro-Lucas-Tooth, Sir Hugh Mr. Ian MacArthur and
Griffiths, Eldon (Bury St. Edmunds) Murton, Oscar Mr. Francis Pym.
Griffiths, Peter (Smethwick) Neave, Airey
Abse, Leo Grey, Charles Milne, Edward (Blyth)
Albu, Austen Griffiths, David (Rother Valley) Molloy, William
Allaun, Frank (Salford, E.) Griffiths, Rt. Hn. James (Llanelly) Monslow, Walter
Alldritt, Walter Griffiths, Will (M'chester, Exchange) Morris, Alfred (Wythenshawe)
Atkinson, Norman Gunter, Rt. Hn. R. J. Morris, Charles (Openshaw)
Bacon, Miss Alice Hamilton, James (Bothwell) Morris, John (Aberavon)
Bagier, Gordon A. T. Hamilton, William (West Fife) Mulley, Rt. Hn. Frederick (Sheffield Pk)
Barnett, Joel Hamling, William (Woolwich, W.) Murray, Albert
Baxter, William Harper, Joseph Neal, Harold
Bence, Cyril Harrison, Walter (Wakefield) Newens, Stan
Bennett, J. (Glasgow, Bridgeton) Hart, Mrs. Judith Noel-Baker, Francis (Swindon)
Binns, John Hattersley, Roy Noel-Baker, Rt. Hn. Philip (Derby, S.)
Bishop, E. S. Hazell, Bert Norwood, Christopher
Blackburn, F. Healey, Rt. Hn. Denis Oakes, Gordon
Blenkinsop, Arthur Heffer, Eric S. Ogden, Eric
Boardman, H. Henderson, Rt. Hn. Arthur O'Malley, Brian
Bottomley, Rt. Hn. Arthur Herbison, Rt. Hn. Margaret Orbach, Maurice
Bowden, Rt. Hn. H. W. (Leics S.W.) Hobden, Dennis (Brighton, K'town) Orme, Stanley
Boyden, James Holman, Percy Oswald, Thomas
Braddock, Mrs. E. M. Horner, John Owen, Will
Bradley, Tom Houghton, Rt. Hn. Douglas Page, Derek (King's Lynn)
Bray, Dr. Jeremy Howarth, Harry (Wellingborough) Paget, R. T.
Broughton, Dr. A. D. D. Howell, Denis (Small Heath) Palmer, Arthur
Brown, Rt. Hn. George (Belper) Howie, W. Pannell, Rt. Hn. Charles
Brown, Hugh D. (Glasgow, Provan) Hoy, James Pargiter, G. A.
Buchan, Norman (Renfrewshire, W.) Hughes, Cledwyn (Anglesey) Park, Trevor (Derbyshire, S.E.)
Buchanan, Richard Hughes, Emrys (S. Ayrshire) Parkin, B. T.
Butler, Herbert (Hackney, C.) Hughes, Hector (Aberdeen, N.) Pavitt, Laurence
Butler, Mrs. Joyce (Wood Green) Hunter, Adam (Dunfermline) Pearson, Arthur (Pontypridd)
Callaghan, Rt. Hn. James Hunter, A. E. (Feltham) Peart, Rt. Hn. Fred
Carmichael, Neil Hynd, H. (Accrington) Pentland, Norman
Chapman, Donald Irving, Sydney (Dartford) Perry, Ernest G.
Coleman, Donald Jackson, Colin Popplewell, Ernest
Conlan, Bernard Janner, Sir Barnett Prentice, R. E.
Corbet, Mrs. Freda Jay, Rt. Hn. Douglas Price, J. T. (Westhoughton)
Craddock, George (Bradford, S.) Jeger, Mrs. Lena (H'b'n & St. P'cras, S.) Probert, Arthur
Crawshaw, Richard Jenkins, Hugh (Putney) Pursey, Cmdr. Harry
Cronin, John Johnson, Carol (Lewisham, S.) Randall, Harry
Crosland, Rt. Hn. Anthony Johnson, James (K'ston-on-Hull, W.) Rankin, John
Crossman, Rt. Hn. R. H. S. Jones, Dan (Burnley) Redhead, Edward
Cullen, Mrs. Alice Jones, Rt. Hn. Sir Elwyn (W. Ham, S.) Rees, Merlyn
Dalyell, Tam Jones, J. Idwal (Wrexham) Rhodes, Geoffrey
Darling, George Jones, T. W. (Merioneth) Richards, Ivor
Davies, Ifor (Gower) Kelley, Richard Roberts, Albert (Normanton)
Davies, S. O. (Merthyr) Kenyon, Clifford Roberts, Goronwy (Caernarvon)
de Freitas, Sir Geoffrey Kerr, Mrs. Anne (R'ter & Chatham) Robertson, John (Paisley)
Delargy, Hugh Kerr, Dr. David (W'worth, Central) Robinson, Rt. Hn. K. (St. Pancras, N.)
Dell, Edmund Lawson, George Rodgers, William (Stockton)
Dempsey, James Leadbitter, Ted Rogers, George (Kensington, N.)
Diamond, Rt. Hn. John Ledger, Ron Rose, Paul B.
Dodds, Norman Lee, Rt. Hn. Frederick (Newton) Ross, Rt. Hn. William
Doig, Peter Lee, Miss Jennie (Cannock) Rowland, Christopher
Driberg, Tom Lever, Harold (Cheetham) Sheldon, Robert
Duffy, Dr. A. E. P. Lever, L. M. (Ardwick) Shore, Peter (Stepney)
Dunn, James A. Lewis, Arthur (West Ham, N.) Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)
Dunnett, Jack Lewis, Ron (Carlisle) Short, Mrs. Renée (W'hampton, N. E.)
Edelman, Maurice Loughlin, Charles Silkin, John (Deptford)
Edwards, Robert (Bilston) Mabon, Dr. J. Dickson Silkin, S. C. (Camberwell, Dulwich)
English, Michael McBride, Neil Silverman, Julius (Aston)
Ennals, David McCann, J. Skeffington, Arthur
Ensor, David MacColl, James Slater, Joseph (Sedgefield)
Evans, Albert (Islington, S.W.) MacDermot, Niall Small, William
Evans, Ioan (Birmingham, Yardley) McGuire, Michael Snow, Julian
Fernyhough, E. Mclnnes, James Spriggs, Leslie
Finch, Harold (Bedwellty) McKay, Mrs. Margaret Steele, Thomas (Dunbartonshire, W.)
Fletcher, Sir Eric (Islington, E.) Mackenzie, Gregor (Rutherglen) Stewart, Rt. Hn. Michael
Fletcher, Ted (Darlington) Mackie, John (Enfield, E.) Stonehouse, John
Fletcher, Raymond (Ilkeston) McLeavy, Frank Stones, William
Floud, Bernard Mahon, Peter (Preston, S.) Strauss, Rt. Hn. G. R. (Vauxhall)
Foley, Maurice Mahon, Simon (Bootle) Summerskill, Hn. Dr. Shirley
Foot, Sir Dingle (Ipswich) Mallalieu, J. P. W. (Huddersfield, E.) Swain, Thomas
Foot, Michael (Ebbw Vale) Manuel, Archie Swingler, Stephen
Ford, Ben Mapp, Charles Symonds, J. B.
Fraser, Rt. Hn. Tom (Hamilton) Marsh, Richard Taverne, Dick
Freeson, Reginald Mason, Roy Thomas, George (Cardiff, W.)
Galpern, Sir Myer Maxwell, Robert Thomas, Iorwerth (Rhondda, W.)
Garrett, W. E. Mayhew, Christopher Thomson, George (Dundee, E.)
George, Lady Megan Lloyd Mellish, Robert Thornton, Ernest
Ginsburg, David Mendelson, J. J. Tinn, James
Gourlay, Harry Mikardo, Ian Tomney, Frank
Greenwood, Rt. Hn. Anthony Millan, Bruce Tuck, Raphael
Gregory, Arnold Miller, Dr. M. S. Urwin, T. W.
Varley, Eric G. Wigg, Rt. Hn. George Winterbottom, R. E.
Wainwright, Edwin Wilkins, W. A. Woodburn, Rt. Hn. A.
Walden, Brian (All Saints) Willey, Rt. Hn. Frederick Woof, Robert
Walker, Harold (Doncaster) Williams, Alan (Swansea, W.) Wyatt, Woodrow
Wallace, George Williams, Clifford (Abertillery) Yates, Victor (Ladywood)
Watkins, Tudor Williams, Mrs. Shirley (Hitchin) Zilliacus, K.
Weitzman, David Williams, W. T. (Warrington)
Wells, William (Walsall, N.) Willis, George (Edinburgh, E.) TELLERS FOR THE NOES:
White, Mrs. Eirene Wilson, Rt. Hon. Harold (Huyton) Mrs. Harriet Slater and
Whitlock, William Wilson, William (Coventry, S.) Mr. Alan Fitch.

Further consideration of the Bill, as amended, adjourned.—[Mrs. Harriet Slater.]

Bill, as amended, to be further considered this day.