HC Deb 08 July 1965 vol 715 cc1946-72


4. This Part of this Schedule has effect in relation to capital gains tax, including capital gains tax chargeable under section 77 of this Act, and also in relation to corporation tax and in this Part of this Schedule "tax" shall be construed accordingly.

Information as to assets acquired

5.—(1) A notice under section 7 or section 9(6) of the Income Tax Management Act 1965 (return of total income and return of income for purposes of a claim) may require particulars of any assets acquired by the person on whom the notice was service in the period specified in the notice, being a period beginning not earlier than 6th April 1965 but excluding—

  1. (a) any assets exempted by section 26 of this Act, or
  2. (b) unless the amount or value of the consideration for its acquisition exceeded one thousand pounds, any asset which is tangible moveable property and is not within the exceptions in section 29(6) of this Act, or
  3. (c) any assets acquired as trading stock.

(2) The particulars required under this paragraph may include particulars of the person from whom the asset was acquired, and of the consideration for the acquisition.

Special reurns

6.—(1) For the purpose of obtaining particulars of chargeable gains the inspector may by notice in writing require a return under any of the provisions of this paragraph.

(2) An issuing house or other person carrying on a business of effecting public issues of shares or securities in any company, or placings of shares or securities in any company, either on behalf of the company, or on behalf of holders of blocks of shares or securities which have not previously been the subject of a public issue or placing, may be required to make a return of all such public issues or placings effected by that person in the course of the business in the period specified in the notice requiring the return, giving particulars of the persons to or with whom the shares or securities are issued, allotted or placed, and the number or amount of the shares or securities so obtained by them respectively.

(3) A person not carrying on such a business may be required to make a return as regards any such public issue or placing effected by that person and specified in the notice, giving particulars of the persons to or with whom the shares or securities are issued, allotted, or placed and the number or amount of the shares or securities so obtained by them respectively.

(4) A member of the Stock Exchange in the United Kingdom, other than a jobber, may by notice in writing served on him be required within such time not less than twenty-eight days as may be specified in the notice—

  1. (a) to state whether he has acted on behalf of a person who it appears to the 1947 inspector is or may be chargeable to tax on capital gains in connection with any acquisition or disposal of assets by that person;
  2. (b) if so, to furnish information in his possession with respect to the acquisition or disposal, being information as to
    1. (i) the assets comprised in the acquisition or disposal and the consideration for the acquisition or disposal; and
    2. (ii) the date and manner on the acquisition or disposal, including any condition to which it was subject and the satisfaction or otherwise of any such condition;
and Part III of the Finance Act 1960 (which relates to penalties) shall have effect as if this subsection were among the provisions specified in the second column of the Sixth Schedule to that Act.

(5) The Committee or other person or body of persons responsible for managing a clearing house for any terminal market in commodities may by notice in writing served on him be required within such time not less than 28 days as may be specified in the notice:—

  1. (a) to state whether he has any information as to transactions on behalf of a person who it appears to the Inspector is or may be chargeable to tax on capital gains in connection with any acquisition or disposal of assets by that person; and
  2. (b) if so, to furnish information in his possession with respect to the acquisition or disposal being information as to:—
    1. (i) the assets comprised in the acquisition or disposal and the consideration for the acquisition or disposal; and
    2. (ii) the date and manner of the acquisition and disposal, including any condition to which it was subject and the satisfaction or otherwise of any such condition;
and Part III of the Finance Act 1960 (which relates to penalties) shall have effect as if this subsection were among the provisions specified in the second column of the Sixth Schedule to that Act.

(6) An auctioneer and any person carrying on a trade of dealing in any description of tangible moveable property, or of acting as an agent or intermediary in dealings in any description of tangible moveable property may be required by notice in writing to state the price at which any such property specified in the notice was disposed of together with the date of such disposal.

(7) No person shall be required under this paragraph to give particulars of any transaction effected before 7th April 1965 or more than three years before the service of the notice requiring him to give particulars.

(8) Part III of the Finance Act 1960 (penalties) shall have effect as if this paragraph were among the provisions specified in the second column of Schedule 6 to that Act.

Nominee shareholdings

7.—(1) Section 250 (4) of the Income Tax Act 1952 (information from nominee shareholders) shall apply for the purposes of obtaining particulars of chargeable gains, but a notice under that subsection as so applied may be given by an inspector or other officer of the Board.

(2) The said section 250 (4) as applied by this paragraph shall have effect as if references to shares included references to securities and loan capital.

Returns of assets in settlements

8. Section 410 of the Income Tax Act 1952 (power to obtain information for purposes connected with settlements) shall apply for the purposes of this Part of this Act as it applies for the purposes of Chapter III of Part XVIII of that Act.


9. A return of income of a partnership under section 144 of the Income Tax Act 1952 shall include—

  1. (a) with respect to any disposal of partnership property during a period to which any part of the return relates the like particulars as if the partnership were liable to tax or any chargeable gain accruing on the disposal, and
  2. (b) with respect to any acquisition of partnership property the particulars required under paragraph 5 of this Schedule.

Information as to non-resident companies and trusts

10.—(1) A person holding shares or securities in a company which is not resident or ordinarily resident in the United Kingdom, or who is interested in settled property under a settlement the trustees of which are not resident or ordinarily resident in the United Kingdom, may be required by a notice by the Board to give such particulars as may be known to him and are reasonably required to determine whether the company or trust falls within section 37 or section 38 of this Act, and whether any chargeable gains have accrued to that company, or to the trustees of that settlement, in respect of which the person to whom the notice is given is liable to capital gains tax under the said section 37 or the said section 38.

(2) Part III of the Finance Act 1960 (penalties) shall have effect as if this paragraph were among the provisions specified in the second column of Schedule 6 to that Act.

Liability of trustees, etc.

11.—(1) Capital gains tax chargeable in respect of chargeable gains accruing to the trustees of a settlement or capital gains tax due from the personal representatives of a deceased person may be assessed and charged on and in the name of any one or more of those trustees or personal representatives, but where an assessment is made in pursuance of this sub-paragraph otherwise than on all the trustees or all the personal representatives the persons assessed shall not include a person who is not resident or ordinarily resident in the United Kingdom.

(2) Subject to section 21(5) of this Act, chargeable gains accruing to the trustees of a settlement or to the personal representatives of a deceased person, and capital gains tax chargeable on or in the name of such trustees or personal representatives, shall not be regarded for the purposes of this Part of this Act as accruing to, or chargeable on, any other person, nor shall any trustee or personal representative be regarded for the purposes of this Part of this Act as an individual, but the provisions of Part XV of the Income Tax Act 1952 as applied by this Schedule shall not affect the question of who is the person to whom chargeable gains accrue, or who is chargeable to capital gains tax, so far as that question is relevant for the purposes of any exemption or of any provision determining the rate at which capital gains tax is chargeable.

(3) Chargeable gains which accrue to an individual on the disposal of assets deemed to be made by him on his death shall be regarded for the purposes of this Part of this Act as accruing to an individual notwithstanding that capital gains tax in respect of the gains is chargeable and assessable on his personal representatives.

Conclusiveness of income tax decisions

12. Any assessment to income tax or decision on a claim under the Income Tax Acts, and any decision on an appeal under the Income Tax Acts against such an assessment or decision, shall be conclusive so far as under section 20 of this Act or Schedule 6 to this Act or any other provision of this Part of this Act liability to tax depends on the provisions of the Income Tax Acts.

13.—(1) For the purposes of this part of this Act and subject to the provisions of this section the Board may authorise an Inspector or other officer of the Board to inspect any property for the purpose of ascertaining its market value;

(2) When such authorisation is given the Inspector shall give fourteen days notice to the person having the custody or possession of the property and specifying the property in question and such person shall permit the Inspector or other officer of the Board so authorised to inspect it at such time or times as may be reasonable in the circumstances. The person can, if he so wishes, take the specified property to the offices of the Inspector providing the specified property is taken there within fourteen days of the expiry of the Inspector's notice that he wishes to examine the specified property;

(3) The property which may be inspected under this paragraph is property which has been the subject matter of an acquisition or disposal within six months of the date of the notice referred to in sub-paragraph (2) above;

(4) If any person wilfully delays or obstructs an Inspector or other officer of the Board authorised in writing and acting in pursuance of this paragraph he shall be liable on summary conviction to a fine not exceeding five pounds.

Priority of tax in bankruptcy

14.—(1) In a bankruptcy under the law of any part of the United Kingdom capital gains tax and corporation tax shall each have the same priority as income tax.

(2) In the application of this Part of this Act to Northern Ireland the reference in this paragraph to priority in bankruptcy includes a reference to any other priority given to income tax under the Bankruptcy Acts (Northern Ireland) 1857 to 1964.

Form of declaration of Commissioners and others

15. In the form of declaration in Part I of Schedule 1 to the Income Tax Management Act 1964 for the words "the profits tax" (in both places) there shall be substituted the words "any tax on company profits or capital gains", but not so as to invalidate any declaration made before the passing of this Act.

Forms of assessments and returns and other documents

16. Any return or assessment or other document relating to chargeable gains or tax on capital gains may be combined with one relating to income or income tax.

Northern Ireland

17. Any reference in this Part of this Act to the General Commissioners shall in its application to Northern Ireland be a reference to the Special Commissioners.

There was at an earlier stage in the proceedings on the Bill some discussion on the Ninth Schedule, and as a result of the rather unsatisfactory explanations which were given we on this side of the House have thought it both necessary and, I hope, helpful to move what is almost a new Schedule, with substantial alterations of the existing one.

I will start with the proposal to amend Part I of the Ninth Schedule, which is the portion relating to the Capital Gains Tax, by the addition of two new sub-paragraphs, (4) and (5). The effect of this Amendment, which relates to shares not quoted on a stock exchange in the United Kingdom, is simply this, that we feel sure that where it is necessary to value them a far better procedure than that detailed earlier in the Bill would be to operate the provisions relating to Estate Duty, in particular Section 10 of the Act of 1894.

The fact is that the Estate Duty office is far more experienced in dealing with valuations of this kind, which really—I say this in no sense of disrespect—are outside the ambit of the General Commissioners of Income Tax. Excellent though they may be, the fact remains that the Estate Duty office has experience of valuations of such shares, which can, of course, be extremely complicated, involving such matters as normal and special procedures, whether to value on a yield or an asset basis, restrictions on marketability, minority interests, and so forth.

For that reason we feel that the Estate Duty procedure is well suited to that, and that is what these two sub-paragraphs are designed to do. I hope that the Financial Secretary will feel that the commendations which I am giving to the Estate Duty office are valid and valuable, and will be able to recognise that this procedure to deal with this class of asset has every advantage.

The next point I draw attention to occurs in paragraph 2(1,d), the last words. This is a paragraph empowering the Board to make regulations about appeals, a very important power, and it details in a number of sub-paragraphs the matters which are to be covered by the regulations.

Mr. Lubbock

I must say that this is an enormously long Amendment and rather difficult to read. Before the hon. and learned Gentleman gets to subparagraph (1,d) would he just tell me whether there is any difference between the table in the Schedule and the table as set out in the Amendment?

Mr. Roots

The words to which I want to draw attention are the final words of that sentence: enabling all those interested in the ascertainment of the said value to be heard before the matter is determined". I think that one should link that with the rather similar wording in sub-paragraph (b), which says: entitling persons, in addition to those who would be so entitled apart from the regulations, to appear on such appeals. We have thought it right to draw particular attention to the importance of making sure that people with a similar asset to one which is the subject of an appeal should not be prejudiced by a case which has been heard before. I shall not attempt to detail the many examples which can be given of the sort of thing I have in mind, but, obviously, there can be variations between two pictures by the same master.

Experience in recent years shows that where a Government Department is a party to a series of appeals, automatically having the power to influence the order in which those appeals are heard and decisions taken can give rise to an unsatisfactory state of affairs. In my experience it originated with war damage cases. The practice there was to get a number of decisions on cases in which one of the parties, in fact a member of the public, was not in a position to contest the case. Having obtained a number of decisions on a certain point, or a number of settlements on a certain point, somebody else was then faced with, as it were, a precedent, and was told, "Oh, but 20 people have already agreed the value of this article".

This practice has been continued, for example by the London County Council in compulsory acquisition cases, which was the subject of very sturdy comment by the Lands Tribunal. It obtains in many appeals on rent valuation to rent valuation courts, or at any rate the public have that impression. It does not follow that the Department is acting dishonourably at all. It has a choice, and it naturally chooses the sequence which suits it best.

Mr. MacDermot

Surely that is not right in the case of rent appeals. I do not think that the Department has any choice. It is a matter for the court.

9.45 p.m.

Mr. Roots

It has a power which it can bring forward, and which in certain areas, for instance in my constituency, is the subject of harsh comment. I am not accusing the Valuation Department of dishonesty. It may suit it to deal with certain forms of property, and it may not be a matter of design to do anyone down. I am not anxious to imply that the Department does anything dishonourable because that is neither necessary nor particularly valuable to my argument, but when, as in this paragraph, one is detailing the subjects on which regulations should be made, it is most important that this House should declare all the aspects which it regards as particularly important. I hope that the Government will recognise that this is a very important aspect when one is detailing the subjects for regulation.

I pass now to paragraph 2(3), where we propose that these regulations should be approved, to use the colloquial term, by a positive Resolution of the House. A new system is being set up. Amendments to existing regulations which had been basically approved by the House could be subject to the negative procedure, such as is proposed in the Bill, but entirely new regulations should be subject to the positive Resolution of the House.

Paragraphs 6(4) and (5) relate to members of the Stock Exchange and persons responsible for managing a clearing house for any terminal market in commodities. The Amendment closely follows the powers given to the Revenue by Section 16(7) of the Finance Act, 1962. Our criticism is that the Bill might require a general return. There is no great magic about a return, but it could be unlimited as to period or number of transactions and it might be possible to serve a requirement on a Stock Exchange firm, or one of the commodity market firms, to give a complete list of all its transactions for the last three or four years, or whatever the period might be.

This kind of power to order wholesale returns is quite improper. If the Revenue believes that someone has falsified or erred in his accounts for tax purposes, it could perfectly well ask for particulars of transactions. It must be given the power to make such inquiries and in the 1962 Act it was given comprehensive powers to make inquiries about transactions which might have resulted in capital gains. Incidentally, the mere selling or buying price by itself would not be sufficient even then to determine whether there had been a chargeable gain.

We propose that the Revenue should be given the power to ask for particulars and to require an answer within 28 days. The cases are identical, but I will deal with the Stock Exchange provision when the firm would have to state whether it had acted on behalf of a person who, it appeared to the inspector, might be chargeable to tax on capital gains, to furnish information about acquisition or disposal of assets comprised in the acquisition or disposal and the date and manner of the acquisition or disposal, including any condition to which it was subject and the satisfaction or otherwise of any such condition.

The House has to remember that there is to be a penalty clause; in other words, either error or failure in furnishing the return could result in an appreciable penalty.

Perhaps the most important matter from the point of view of the House of Commons is this. Neither before the Bill was introduced nor during our consideration of it have we heard any criticism of the operation of the powers under the 1962 Act. We have never been told that further powers must be given because the 1962 Act powers have proved unsatisfactory. Until a very strong case is made for extending those powers, the House should be very cautious. I wait with interest to hear whether we are to be given positive particulars showing why the existing wide powers are unsatisfactory and why it is necessary to give carte blanche to the Revenue to require further particulars, perhaps quite unreasonably.

I do not wish to impute to the Revenue the attributes of a malefactor, but one can understand that, perhaps, enthusiasm may lead authorities, quite bona fide, to put burdens on a partnership or undertaking on the Stock Exchange or the commodity market which, looked at both from the point of view of the taxpayer and from the point of view of common sense, are quite unnecessary and extremely onerous. In the circumstances, until the powers under the 1962 Act are shown conclusively to be unsatisfactory, the House should maintain them and not extend them.

Mr. A. P. Costain (Folkestone and Hythe)

Before he leaves that point, perhaps my hon. Friend will assure the House that the misspelling in the heading at line 125, "Special reurns", does not mean that he wants to bury the whole Bill in an urn.

Mr. Roots

I had considered whether powers of cremation fell within the Bill, but I have come to the conclusion, from the legal point of view, that they would be outside the Title and, therefore, I need not concern myself with them. While we are on the point about printing, perhaps I may mention that the word "Valuation" should precede paragraph 13. I was sure that the House would wish to sympathise with the printers on this Bill, and I felt that even indirect criticism would be misplaced.

I turn next to paragraph 6(6). Paragraph 6(6) of the Schedule in the Bill gives power to require a return from an auctioneer or any person carrying on the trade of dealing in tangible movable property. He must give particulars of any transactions effected by or through him in which any asset which is tangible moveable property is disposed of for a consideration the amount or value of which, in the hands of the recipient, exceeds £1,000. Again, a virtually unlimited return except that in this case it relates to articles of value above £1,000.

Tangible movable property is readily identifiable and the Revenue will be inquiring about it in respect of the dealings or business of a particular taxpayer or taxpayers. Until the House is convinced to the contrary, the price and the date of disposal should be accepted as giving to the Revenue all it needs to ascertain a price history for the purpose of assessment. To require auctioneers to keep a record of all buyers, all sellers, amounts and dates, and to make this return, failure to keep which information may render them subject to penalty—

Mr. Harold Lever

They keep it anyway.

Mr. Roots

The hon. Gentleman says that, but I am instructed that they do not. The hon. Gentleman has helped the House a great deal, but, knowing what I do of his profession, I hope, in his own interest, that he will not declare that he is carrying on a side-trade as an auctioneer. Otherwise, we may be in difficulties. Auctioneers have a large number of cash transactions, and the precise record of the person and his particulars and dates are not kept.

The special case is the London market where there is a substantial foreign trade of enormous value to the country. Undoubtedly, there would be greatest objection by foreigners if they knew that full particulars had to be recorded, including their names, which could then be required by the British Government. It may be that they have not all that confidence in their own Government and they may attach to our Government the same lack of confidence.

Mr. Lubbock

Would the hon. and learned Gentleman say why he has deleted from the original Clause the words referring to transactions of over £1,000 and why he is now requiring these people to give the less onerous details of all transactions whether or not they concern considerations of more than £1,000?

Mr. Roots

If the requirement were limited in the way suggested in the Amendment, it would be reasonable to require the price and date, which are known to auctioneers. The auctioneer knows when it is sold, and the price is recorded. If in those circumstances there is a special reason for wanting to know the price, which is below £1,000, it would be reasonable to give that information, particularly as it is known to auctioneers. A carte blanche should not be given in circumstances which we cannot envisage unless it is shown that there is no other way of giving the Revenue powers which are essential for them to carry out their functions.

I do not want to delay the House. I pass to paragraph 10. The words in the Bill to which I draw attention are in line 6, which states that a person may be required by a notice by the Board to give such particulars as the Board may consider are required to determine whether the company or trust falls within the relevant Sections. Again there is a penalty. The Amendment states that the person may be required by a notice by the Board to give such particulars as may be known to him"— for overseas concerns the particulars may not be known to him— and are reasonably required to determine whether the company or trust falls within the relevant Sections. The wording in the Bill reserves to the Board the right to decide whether these particulars are required.

If there is a penalty provision, as there is here, it should be left to the court, if there is a prosecution, to consider the defence that the particulars which are required are unreasonable. It is not a matter which should be reserved solely to the Board, which could say, "We consider that they are necessary, and if you do not like it you will be fined". That wording causes considerable objection. I hope that the Government will realise that it is reasonable, first, to ask that the facts should be known to the person of whom inquiry is made and, secondly, that it should be possible to argue whether the requirement is necessary.

Finally, in paragraph 13 we suggest that the inspector may be given authority to inspect and that he should give 14 days notice to the person having custody of the property that he wishes to inspect it at such time or times as may be reasonable in the circumstances". or, alternatively, that the person having possession of the property should produce it. There is no real reason why the inspector should have power to go on somebody's property. It should be made clear that the person may produce the property to the inspector.

I remind the House that we are dealing with a very general power in the sense that a man may have a picture which he bought some time before and may suddenly get a demand for inspection which is in connection with somebody else's tax. It may have nothing to do with him. It may be a sale which occurred previously.

It may be that the Revenue needs to inspect a picture, but I suggest that the word "reasonable" is extremely important. The Bill as it stands contains an authorisation to inspect: at such reasonable times as the Board may consider necessary. If one is to fine a man, the question of reasonableness should not be reserved to the Revenue. [Interruption.] The hon. Member for Manchester, Cheetham (Mr. Harold Lever) and I must disagree on this. I think that it is clear from the wording. If the hon. Member appreciates that, I think that he will be able to support the Amendment because it makes it abundantly clear that that is not reserved for the Board. It is clear that the point could, and would, be raised before the court that in relation to the times it is "reasonable" as the Board considers necessary. There are a number of decisions by the courts making it clear that on this wording or wording like this the decision would be one for the Board.

If the hon. Member for Cheetham disagrees, at least he can say that the wording proposed in the Amendment makes it abundantly clear that this decision is not finally reserved to the Board. There are two sides to the question of "reasonableness". There is "reasonableness" on the part of the taxpayer and "reasonableness" on the part of the Board. There is in that respect, or should be, common ground.

For those reasons, I hope that the Government will realise that this Schedule merits considerable alterations. It has considerable defects. It should be both improved and made clearer.

10.0 p.m.

Mr. MacDermot

I will try, in a few words, to comment on the few words on the Notice Paper—[Laughter.]—and the remarks of the hon. and learned Member for Kensington, South (Mr. Roots). I hope that I will be able to dispose of my reply rather more shortly.

The hon. and learned Gentleman's first point dealt with the question of the procedure under the Bill for dealing with the valuation of unquoted shares and appeals against valuation. The Bill provides that appeals should go to the general commissioners and the reason for this was explained in Committee. It is that we want to secure some consistency in the valuation of these shares. We will be dealing for the most part with the valuation of shares in a large number of small private companies, many of them of a local character. The general commissioners have a wide range of experience, mostly business experience, and they include accountants and people with legal training. They will be able, over a period of time, to build up a considerable corpus of local knowledge and experience.

The shares which must be valued may be held by people who are dispersed widely throughout the country and it is obviously desirable that the same body of people should do the valuation for a particular company. The general commissioners may become concerned with the tax affairs of that company, and will have a considerable knowledge of it. We feel, therefore, that this is the fairer way of ensuring a proper and equitable system of valuation.

As to the appeal procedure, the proposition as put forward rather surprisingly suggests that there should be the right of appeal only to the High Court, as in the Estate Duty procedure. This is something which has been the subject of widespread criticism by those in the Estate Duty sphere, but, I hasten to say, not criticism directed against the Estate Duty office; it is remarkable that in the last 20 years there has been, I think, only one appeal on valuation to the High Court. It has been suggested by some that that is because the expense involved in appealing to the High Court acts as a deterrent effect and that people would prefer the much easier, straightforward, ready and cheaper method of appealing to the general or special commissioners, and that is what we are providing for.

I should answer the point made about the great experience which the Estate Duty office has in this matter. That is recognised and it is the Board's intention to make full use of that knowledge and experience and make it available to inspectors of taxes throughout the country. As hon. Members who are familiar with this subject will know, there are many specialist branches at head office, the members of which have great experience, which is made available generally to tax inspectors throughout the country. That is what will be done in this case to ensure that the benefit of that experience is spread.

The next matter which the hon. and learned Gentleman raised concerned appeals and he pointed out, under paragraph 2(1,d), how important it is to ensure that interested parties who are not directly engaged in a dispute may be allowed to be represented and have their interests heard if a matter goes to appeal. That point has been well taken and I assure the hon. and learned Gentleman that we have it in mind. The regulations which are to be made will have power to make provision for this and it is our full intention to do so. This point also came up in Committee.

The other point in connection with the regulations is the suggestion that they should be subject to the affirmative Resolution procedure and not the negative Resolution procedure. Almost without exception, any kind of regulation which involves imposing any incidence of tax must be subject to the affirmative Resolution procedure. This is, as it were, a classic example of the kind of matter which must be subject to the affirmative procedure. However, these regulations are concerned essentially with matters of machinery and procedure and not with the incidence of tax. They will not affect in any way anyone's liability to tax. There is clear precedent in this. There are many regulations of this kind made in the Income Tax field; for example, the whole of the P.A.Y.E. machinery and procedure is laid down in Regulations made under Section 157 of the Income Tax Act, which is subject to the negative procedure.

The next point which the hon. Gentleman mentioned was the question of returns made by the stockbrokers, and it was suggested that the powers which we are seeking here are intolerably and unnecessarily wide. May I repeat the assurance I gave in Committee and which has been formally given by my right hon. Friend to the Chairman of the Council of the Stock Exchange. The powers will not be used in any oppressive way and will be used solely on a sample basis. We consider it is essential when imposing a comprehensive tax of this kind to take powers for sample test returns; otherwise, if everyone knows that the Revenue will only have power to call for information when they already have a lead to suggest there has been some concealment, it will be an encouragement to that small minority of people who seek to evade their responsibilities and will operate extremely unfairly on the majority of people who are making perfectly honest and legal tax returns.

The proposal which is contained in the Amendment is that we should repeat the restricted powers under Section 16(7) of the Finance Act, 1962. I would remind the House that it was not the proposal originally put forward in the Bill by the Government of the day. It was the proposal which they were driven to by strong back bench pressure from hon. Members opposite when they were in Government.

I also remind hon. Members that in quite a different field there is a requirement for very considerable returns to be made; namely, the requirement under the 1951 Act for banks to make returns of payments of interest exceeding £15 a year. That was introduced by the Labour Government in 1951. It was hotly and bitterly contested by hon. Members opposite as being an intolerable infringement on the liberty and freedom of the subject. Nevertheless, they continued in power for 13 years using that power and never attempted to get rid of it, because they found it was a valuable, necessary and useful means of detecting tax evasion and tax avoidance. I think that provision has led to more back duty cases than almost any other provision in our law.

We do not propose to use the power by calling for regular returns of that kind. It will be used purely on a sample basis. But if we are introducing such a tax, we consider it essential to put in the hands of the Revenue proper powers and instruments to check the returns they receive from independent sources, and that is what the Amendment does.

Mr. Stratton Mills (Belfast, North)

Has it been the experience of the Revenue that the absence of using the sample powers under the short-term speculative gains tax has proved unsatisfactory?

Mr. MacDermot

It is not for me to speak of any period for which we are not responsible. What we are doing is to arm the Revenue with the necessary instruments and means to enable them to check that the returns they are receiving are proper ones.

The next point that was raised was a similar one in relation to auctioneers. This is in a much smaller field, because it only deals with returns of transactions of chattels of over £1,000 in value. Again, though, I repeat the assurance that has been given: we are not going to call for returns over long periods of time, or regular returns of all transactions. Again we shall proceed on a sample check basis.

The next point raised was in connection with returning information about nonresident companies and trusts. The Amendment proposes that the Board should have power to require only such particulars as are known to the taxpayer and as are reasonably required, rather than such particulars as the Board may consider are required. We are here dealing essentially with family companies and family trusts for the most part. Shareholders and beneficiaries will commonly be in a position to acquire and find out the information called for, although they may not be in possession of it at the time when they are asked for the return. If one framed this provision in a limited way that merely enabled the taxpayer to say, "I don't know what the answer is," and that was the end of the matter, the Revenue would be inhibited from a perfectly proper means of obtaining the information that is required about the operations of the company or the trust.

I may be asked what the position will be if the Revenue calls for information that is not within a person's knowledge, and he makes reasonable inquiries of the directors of the company or the trustees of the trust, and is unable to obtain the information. If the question is asked: "In that situation, will the Revenue start proceedings before the court or the commissioners?" the answer is, of course, that the Revenue will not be so foolish as to take proceedings in such circumstances. If it did, the proceedings would very quickly be thrown out by the court or the commissioners.

The final point relates to the question of valuation, about which we had some lengthy and, at times, heated discussions in Committee. This is a provision upon which hon. Members opposite have, at times, allowed their imaginations to run riot, with visions of snoopers having power to enter people's premises to inspect chattels, and so forth. I would again remind hon. Members of the error into which they fall in reading this provision, an error that was repeated by the hon. and learned Member for Kensington, South who, in moving the Amendment, said that Inland Revenue staff should not have power to go on someone's property.

The answer is that they do not have power to go on someone's property. No power is written in; there is no power of entry at all. What is conferred by this provision is a right to inspect a property. If they are denied the exercise of that right their only remedy is to prosecute before the courts where, I think, the maximum penalty is £10. It is an extremely moderate and modest enforcement provision, and one that will only be used as a reserve power.

In the normal case, the matter will be dealt with, as in Estate Duty procedure, in a courteous and reasonable way, with co-operation on both sides. Appointments will be made, and arrangements will be made for inspection, usually by valuers, and negotiations will take place. It is only to deal with someone who completely refuses to co-operate that these provisions are written in, and I say again that they can be as much in the interests of the taxpayer as of the Revenue. As the hon. and learned Member pointed out himself valuation of these assets can affect their purchase.

The valuation will not only concern the particular taxpayer who is negotiating with the Revenue. The decision may affect other people. For example in the case of the gift of a chattel, what is the realisation price for one taxpayer will be the acquisition price for another. The Revenue must therefore have adequate powers for inspection and valuation. That is what is provided for, and the provision is of a very moderate character. I cannot of course accept the Amendment, but the hon. Member made the point that there should be an objective rather than a subjective test by the Commissioners. That is a point we might take an opportunity to rectify, but I am afraid that this hammer is not the one to deal with that nut.

10.15 p.m.

Mr. Grimond

I do not want to delay the House for long on this matter. In spite of what the Financial Secretary said, I should have thought that where, as in this case, we are bringing in a new form of tax there would be a case to revert to the positive procedure which can be quoted, although I do not put a great deal of weight on that argument.

Where I thought the Financial Secretary was not entirely convincing was in his resistance to the Amendment about giving powers to auctioneers and stockbrokers and other persons to furnish particulars of their transactions. The Schedule as drafted is exceptionally wide. There is no limitation on the type of transaction. I should have preferred to have started on a narrower basis. If then the Revenue said that it found itself hampered and peculiarly restricted, it might have gone on to a wider sample. I am afraid that to suspicious minds like mine the argument that very wide powers were written into previous Acts and everyone found them very convenient is not convincing. The onus lies on the Treasury to show that it requires these exceptionally wide powers by coming to the House and making a case for them.

I have a question to ask in relation to powers to demand the production of property from the person who has the custody or possession of it. I must apologise to the Financial Secretary because he might say that I ought to have put down an Amendment on this, but I thought it was covered and now, looking at the Measure, I am not sure that it is. The powers in the Bill are such, I understand, that the power is given to demand the production of an asset or demand to see it without informing the owner. Suppose that the asset is in the custody of a bank, as it may well be. Am I right in thinking that notice will be served on the bank and the asset can be seen without informing the owner? I thought the point was covered in the Clause, but I cannot find it. Everyone would think it reasonable that an owner should be informed and that there should not be power to require the production from anyone who has custody of the asset. I should like the Financial Secretary to assure me on this point, or to say that if there is an opportunity he might deal with it.

Mr. Peter Walker

When we last debated this Schedule it was at an early hour in the morning and we received very little satisfaction on the Amendments which we put forward. We consider the Schedule to be of tremendous importance. It was, therefore, our aim to reproduce the Schedule almost in its entirety and to deal with the many unsatisfactory features in it. Having listened to the Financial Secretary, I believe that he has decided to accept everything for which the Revenue asked without any consideration of the individual position.

This is a very bad principle for Treasury Ministers to work upon. All the Amendments we put forward on the Schedule, mentioned in detail by my hon. and learned Friend the Member for Kensington, South (Mr. Roots) were perfectly reasonable about this. Listening to the Financial Secretary commenting upon them, I felt that there was not one Amendment on which he made a convincing case that it should not be accepted. For example, there was the Amendment dealing with the fact that an affirmative Resolution of the House was needed on an appeal procedure from a particularly new form of tax.

I would have thought that any reasonable Treasury Minister, recognising that the House was concerned about such regulations, would have happily agreed to this particular Amendment. I can see no objection at all why the Financial Secretary should not do so. As to the provisions as far as the Stock Exchange is concerned, I would agree with the remarks made by the right hon. Gentleman the Leader of the Liberal Party on this subject. The significant thing is that when the Treasury Minister was asked whether there was any dissatisfaction about the manner in which the previous regulations worked under the 1962 Act, he was unable to say that there was any dissatisfaction at all with the manner in which these had worked.

What the Revenue has said is that it would like even more powers than it has, and the Treasury has said it would include these in the Act. This is not good enough, because these previous powers were carefully considered upon the basis of protecting the position of the individual and stopping too widespread powers of the Revenue. I can imagine nothing more unreasonable than for a Minister to refuse to insert into the Schedule the phrase which says that the particulars required by the Revenue from an individual should be known to him and should be reasonable. Alas, this also was rejected.

Then we come to the unpopular Section 13 of this Schedule, described as the

"snooper's" section of the Schedule. The Financial Secretary said there was a great deal of emotion upon this particular subject. I personally hope that there will always be a great deal if emotion on this type of subject. Any hon. Member on this side of the House reading the Amendment we have suggested to subsection (13) must consider that this gives all of the powers that the Revenue or the Treasury could reasonably require. The power for that individual to select to take the particular article concerned to the inspector of taxes is surely one which could have been granted by the Treasury. Any person reading those four subsections of Section 13, proposed by my right hon. and hon. Friends, must agree that they are far better provisions than are provided in the Schedule as it now stands.

The Minister's reply has been a very real disappointment to us. We tried to give every power that was reasonable, and this attempt has been rejected. I urge my right hon. and hon. Friends to divide the House.

Question put, That the words proposed to be left out, to the end of line 38, in page 95, stand part of the Bill:—

The House divided: Ayes 276, Noes 272.

Division No. 247.] AYES [10.24 p.m.
Abse, Leo Chapman, Donald Finch, Harold (Bedwellty)
Albu, Austen Coleman, Donald Fitch, Alan (Wigan)
Allaun, Frank (Salford, E.) Conlan, Bernard Fletcher, Sir Eric (Islington, E.)
Alldritt, Walter Corbet, Mrs. Freda Fletcher, Ted (Darlington)
Atkinson, Norman Craddock, George (Bradford, S.) Fletcher, Raymond (Ilkeston)
Bacon, Miss Alice Crawshaw, Richard Floud, Bernard
Bagier, Gordon A. T. Cronin, John Foley, Maurice
Barnett, Joel Crosland, Rt. Hn. Anthony Foot, Sir Dingle (Ipswich)
Baxter, William Crossman, Rt. Hn. R. H. S. Foot, Michael (Ebbw Vale)
Bellenger, Rt. Hn. F. J. Cullen, Mrs. Alice Ford, Ben
Bence, Cyril Dalyell, Tam Fraser, Rt. Hn. Tom (Hamilton)
Benn, Rt. Hn. Anthony Wedgwood Darling, George Freeson, Reginald
Bennett, J. (Glasgow, Bridgeton) Davies, Ifor (Gower) Galpern, Sir Myer
Binns, John Davies, S. O. (Merthyr) Garrett, W. E.
Bishop, E. S. de Freitas, Sir Geoffrey George, Lady Megan Lloyd
Blackburn, F. Delargy, Hugh Ginsburg, David
Blenkinsop, Arthur Dell, Edmund Gourlay, Harry
Boardman, H. Dempsey, James Gregory, Arnold
Boston, T. G. Diamond, Rt. Hn. John Grey, Charles
Bowden, Rt. Hn. H. W. (Leics S. W.) Dodds, Norman Griffiths, David (Rother Valley)
Boyden, James Doig, Peter Griffiths, Rt. Hn. James (Llanelly)
Braddock, Mrs. E. M. Driberg, Tom Griffiths, Will (M'chester, Exchange)
Bradley, Tom Duffy, Dr. A. E. P. Gunter, Rt. Hn. R. J.
Bray, Dr. Jeremy Dunn, James A. Hamilton, James (Bothwell)
Broughton, Dr. A. D. D. Dunnett, Jack Hamilton, William (West Fife)
Brown, Rt. Hn. George (Belper) Edelman, Maurice Hamling, William (Woolwich, W.)
Brown, Hugh D. (Glasgow, Provan) Edwards, Rt. Hn. Ness (Caerphilly) Hannan, William
Brown, R. W. (Shoreditch & Fbury) Edwards, Robert (Bilston) Harrison, Walter (Wakefield)
Buchan, Norman (Renfrewshire, W.) English, Michael Hart, Mrs. Judith
Buchanan, Richard Ennals, David Hattersley, Roy
Butler, Herbert (Hackney, C.) Ensor, David Hazell, Bert
Butler, Mrs. Joyce (Wood Green) Evans, Albert (Islington, S. W.) Healey, Rt. Hn. Denis
Callaghan, Rt. Hn. James Evans, Ioan (Birmingham, Yardley) Heffer, Eric S.
Carmichael, Neil Fernyhough, E. Henderson, Rt. Hn. Arthur
Herbison, Rt. Hn. Margaret Mikardo, Ian Short, Rt. Hn. E. (N'c'tle-on-Tyne, C.)
Hobden, Dennis (Brighton, K'town) Millan, Bruce Short, Mrs. Renée (W'hampton, N. E.)
Holman, Percy Miller, Dr. M. S. Silkin, John (Deptford)
Howarth, Harry (Wellingborough) Milne, Edward (Blyth) Silkin, S. C. (Camberwell, Dulwich)
Howarth, Robert L. (Bolton, E.) Molloy, William Silverman, Julius (Aston)
Howell, Denis (Small Heath) Monslow, Walter Silverman, Sydney (Nelson)
Hoy, James Morris, Alfred (Wythenshawe) Skeffington, Arthur
Hughes, Emrys (S. Ayrshire) Morris, Charles (Openshaw) Slater, Mrs. Harriet (Stoke, N.)
Hughes, Hector (Aberdeen, N.) Morris, John (Aberavon) Slater, Joseph (Sedgefield)
Hunter, Adam (Dunfermline) Mulley, Rt. Hn. Frederick (Sheffield Pk) Small, William
Hunter, A. E. (Feltham) Murray, Albert Snow, Julian
Hynd, H. (Accrington) Neal, Harold Spriggs, Leslie
Irvine, A. J. (Edge Hill) Newens, Stan Steele, Thomas (Dunbartonshire, W.)
Irving, Sydney (Dartford) Noel-Baker, Francis (Swindon) Stewart, Rt. Hn. Michael
Jackson, Colin Noel-Baker, Rt. Hn. Philip (Derby, S.) Stonehouse, John
Jay, Rt. Hn. Douglas Norwood, Christopher Stones, William
Jeger, George (Goole) Oakes, Gordon Strauss, Rt. Hn. G. R. (Vauxhall)
Jeger, Mrs. Lena (H'b'n & St. P'cras, S.) Ogden, Eric Summerskill, Hn. Dr. Shirley
Jenkins, Hugh (Putney) O'Malley, Brian Swain, Thomas
Johnson, Carol (Lewisham, S.) Orbach, Maurice Swingler, Stephen
Johnson, James (K'ston-on-Hull, W.) Orme, Stanley Symonds, J. B.
Jones, Dan (Burnley) Oswald, Thomas Taverne, Dick
Jones, Rt. Hn. Sir Elwyn (W. Ham, S.) Owen, Will Taylor, Bernard (Mansfield)
Jones, J. Idwal (Wrexham) Paget, R. T. Thomas, George (Cardiff, W.)
Jones, T. W. (Merioneth) Palmer, Arthur Thomas, Iorwerth (Rhondda, W.)
Kelley, Richard Pannell, Rt. Hn. Charles Thomson, George (Dundee, E.)
Kenyon, Clifford Pargiter, G. A. Thornton, Ernest
Kerr, Mrs. Anne (R'ter & Chatham) Park, Trevor (Derbyshire, S. E.) Tinn, James
Lawson, George Parker, John Tomney, Frank
Leadbitter, Ted Parkin, B. T. Tuck, Raphael
Ledger, Ron Pavitt, Laurence Urwin, T. W.
Lee, Rt. Hn. Frederick (Newton) Pearson, Arthur (Pontypridd) Varley, Eric G.
Lever, Harold (Cheetham) Peart, Rt. Hn. Fred Wainwright, Edwin
Lever, L. M. (Ardwick) Pentland, Norman Walden, Brian (All Saints)
Lewis, Arthur (West Ham, N.) Perry, Ernest G. Walker, Harold (Doncaster)
Lewis, Ron (Carlisle) Popplewell, Ernest Wallace, George
Lipton, Marcus Prentice, R. E. Warbey, William
Loughlin, Charles Price, J. T. (Westhoughton) Watkins, Tudor
Mabon, Dr. J. Dickson Probert, Arthur Weitzman, David
McBride, Neil Pursey, Cmdr. Harry Wells, William (Walsall, N.)
McCann, J. Randall, Harry Whitlock, William
MacColl, James Rankin, John Wigg, Rt. Hn. George
MacDermot, Niall Redhead, Edward Wilkins, W. A.
McGuire, Michael Rees, Merlyn Willey, Rt. Hn. Frederick
McInnes, James Reynolds, G. W. Williams, Alan (Swansea, W.)
McKay, Mrs. Margaret Rhodes, Geoffrey Williams, Clifford (Abertillery)
Mackenzie, Gregor (Rutherglen) Richards, Ivor Williams, Mrs. Shirley (Hitchin)
Mackie, John (Enfield, E.) Roberts, Albert (Normanton) Williams, W. T. (Warrington)
Mahon, Peter (Preston, S.) Roberts, Goronwy (Caernarvon) Willis, George (Edinburgh, E.)
Mahon, Simon (Bootle) Robertson, John (Paisley) Wilson, William (Coventry, S.)
Mallalieu, J. P. W. (Huddersfield, E.) Robinson, Rt. Hn. K. (St. Pancras, N.) Winterbottom, R. E.
Manuel, Archie Rodgers, William (Stockton) Woodburn, Rt. Hn. A.
Mapp, Charles Rogers, George (Kensington, N.) Woof, Robert
Marsh, Richard Rose, Paul B. Wyatt, Woodrow
Mason, Roy Ross, Rt. Hn. William Yates, Victor (Ladywood)
Maxwell, Robert Rowland, Christopher Zilliacus, K.
Mayhew, Christopher Sheldon, Robert
Mellish, Robert Shinwell, Rt. Hn. E. TELLERS FOR THE AYES:
Mendelson. J. J. Shore, Peter (Stepney) Mr. Howie and Mr. Harper.
Agnew, Commander Sir Peter Bossom, Hn. Clive Channon, H. P. G.
Alison, Michael (Barkston Ash) Box, Donald Chataway, Christopher
Allan, Robert (Paddington, S.) Boyd-Carpenter, Rt. Hn. J. Chichester-Clark, R.
Allason, James (Hemel Hempstead) Boyle, Rt. Hn. Sir Edward Clark, Henry (Antrim, N.)
Anstruther-Gray, Rt. Hn. Sir W. Braine, Bernard Clark, William (Nottingham, S.)
Astor, John Brewis, John Cole, Norman
Atkins, Humphrey Brinton, Sir Tatton Cooke, Robert
Awdry, Daniel Bromley-Davenport, Lt.-Col. Sir Walter Cooper, A. E.
Baker, W. H. K. Brooke, Rt. Hn. Henry Cooper-Key, Sir Neill
Balniel, Lord Brown, Sir Edward (Bath) Corfield, F. V.
Barber, Rt. Hn. Anthony Bruce-Gardyne, J. Costain, A. P.
Barlow, Sir John Bryan, Paul Courtney, Cdr. Anthony
Batsford, Brian Buchanan-Smith, Alick Craddock, Sir Beresford (Spelthorne)
Bell, Ronald Buck, Antony Crawley, Aidan
Bennett, Sir Frederic (Torquay) Bullus, Sir Eric Crosthwaite-Eyre, Col. Sir Oliver
Berkeley, Humphry Burden, F. A. Crowder, F. P.
Berry, Hn. Anthony Butcher, Sir Herbert Cunningham, Sir Knox
Biffen, John Buxton, Ronald Curran, Charles
Biggs-Davison, John Campbell, Gordon Currie, G. B. H.
Birch, Rt. Hn. Nigel Carlisle, Mark Dalkeith, Earl of
Black, Sir Cyril Carr, Rt. Hn. Robert Dance, James
Blaker, Peter Cary, Sir Robert Davies, Dr. Wyndham (Perry Barr)
d'Avigdor-Goldsmid, Sir Henry Johnston, Russell (Inverness) Pounder, Rafton
Dean, Paul Jones, Arthur (Northants, S.) Powell, Rt. Hn. J. Enoch
Digby, Simon Wingfield Jopling, Michael Price, David (Eastleigh)
Dodds-Parker, Douglas Joseph, Rt. Hn. Sir Keith Prior, J. M. L.
Doughty, Charles Kaberry, Sir Donald Quennell, Miss J. M.
Drayson, G. B. Kerby, Capt. Henry Ramsden, Rt. Hn. James
du Cann, Rt. Hn. Edward Kerr, Sir Hamilton (Cambridge) Rawlinson, Rt. Hn. Sir Peter
Eden, Sir John Kershaw, Anthony Redmayne, Rt. Hn. Sir Martin
Elliot, Capt. Walter (Carshalton) Kilfedder, James A. Rees-Davies, W. R.
Elliott, R. W. (N'c'tle-upon-Tyne, N.) Kimball, Marcus Renton, Rt. Hn. Sir David
Emery, Peter King, Evelyn (Dorset, S.) Ridley, Hn. Nicholas
Errington, Sir Eric Kirk, Peter Ridsdale, Julian
Eyre, Reginald Kitson, Timothy Roberts, Sir Peter (Heeley)
Farr, John Lagden, Godfrey Rodgers, Sir John (Sevenoaks)
Fell, Anthony Lancaster, Col. C. G. Roots, William
Fisher, Nigel Langford-Holt, Sir John Royle, Anthony
Fletcher-Cooke, Charles (Darwen) Legge-Bourke, Sir Harry St. John-Stevas, Norman
Fletcher-Cooke, Sir John (S'pton) Lewis, Kenneth (Rutland) Scott-Hopkins, James
Foster, Sir. John Litchfield, Capt. John Shepherd, William
Fraser, Ian (Plymouth, Sutton) Lloyd, Ian (P'tsm'th, Langstone) Sinclair, Sir George
Galbraith, Hn. T. G. D. Lloyd, Rt. Hn. Selwyn (Wirral) Smith, Dudley (Br'ntf'd & Chiswick)
Gammans, Lady Longden, Gilbert Smyth, Rt. Hn. Brig. Sir John
Gardner, Edward Loveys, Walter H. Soames, Rt. Hn. Christopher
Gibson-Watt, David Lubbock, Eric Spearman, Sir Alexander
Giles, Rear-Admiral Morgan Lucas, Sir Jocelyn Speir, Sir Rupert
Gilmour, Ian (Norfolk, Central) McAdden, Sir Stephen Stainton, Keith
Gilmour, Sir John (East Fife) MacArthur, Ian Stanley, Hn. Richard
Glover, Sir Douglas Mackenzie, Alasdair (Ross & Crom'ty) Stodart, Anthony
Glyn, Sir Richard Mackie, George Y. (C'ness & S'land) Studholme, Sir Henry
Godber, Rt. Hn. J. B. Macleod, Rt. Hn. Iain Talbot, John E.
Goodhart, Philip McMaster, Stanley Taylor, Sir Charles (Eastbourne)
Goodhew, Victor McNair-Wilson, Patrick Taylor, Edward M. (G'gow, Cathcart)
Gower, Raymond Maginnis, John E. Teeling, Sir William
Grant, Anthony Marples, Rt. Hn. Ernest Temple, John M.
Grant-Ferris, R. Marten, Neil Thatcher, Mrs. Margaret
Gresham Cooke, R. Mathew, Robert Thomas, Sir Leslie (Canterbury)
Grieve, Percy Maude, Angus Thompson, Sir Richard (Croydon, S.)
Griffiths, Eldon (Bury St. Edmunds) Maudling, Rt. Hn. Reginald Thorpe, Jeremy
Griffiths, Peter (Smethwick) Mawby, Ray Tiley, Arthur (Bradford, W.)
Grimond, Rt. Hn. J. Maxwell-Hyslop, R. J. Tilney, John (Wavertree)
Gurden, Harold Maydon, Lt.-Cmdr. S. L. C. Turton, Rt. Hn. R. H.
Hall, John (Wycombe) Meyer, Sir Anthony Tweedsmuir, Lady
Hall-Davis, A. G. F. Mills, Peter (Torrington) van Straubenzee, W. R.
Hamilton, Marquess of (Fermanagh) Mills, Stratton (Belfast, N.) Vaughan-Morgan, Rt. Hn. Sir John
Hamilton, M. (Salisbury) Miscampbell, Norman Vickers, Dame Joan
Harris, Frederic (Croydon, N. W.) Mitchell, David Walder, David (High Peak)
Harris, Reader (Heston) Monro, Hector Walker, Peter (Worcester)
Harvey, John (Walthamstow, E.) More, Jasper Walker-Smith, Rt. Hn. Sir Derek
Harvie Anderson, Miss Morrison, Charles (Devizes) Wall, Patrick
Hastings, Stephen Mott-Radclyffe, Sir Charles Walters, Dennis
Hawkins, Paul Munro-Lucas-Tooth, Sir Hugh Ward, Dame Irena
Heald, Rt. Hn. Sir Lionel Murton, Oscar Weatherill, Bernard
Heath, Rt. Hn. Edward Neave, Airey Webster, David
Hendry, Forbes Nicholson, Sir Godfrey Wells, John (Maidstone)
Higgins, Terence L. Noble, Rt. Hn. Michael Whitelaw, William
Hill, J. E. B. (S. Norfolk) Nugent, Rt. Hn. Sir Richard Williams, Sir Rolf Dudley (Exeter)
Hirst, Geoffrey Onslow, Cranley Wills, Sir Gerald (Bridgwater)
Hobson, Rt. Hn. Sir John Orr, Capt. L. P. S. Wilson, Geoffrey (Truro)
Hopkins, Alan Orr-Ewing, Sir Ian Wise, A. R.
Hordern, Peter Osborn, John (Hallam) Wolrige-Gordon, Patrick
Hornby, Richard Osborne, Sir Cyril (Louth) Wood, Rt. Hn. Richard
Hornsby-Smith, Rt. Hn. Dame P. Page, John (Harrow, W.) Woodhouse, Hn. Christopher
Howard, Hn. G. R. (St. Ives) Page, R. Graham (Crosby) Woodnutt, Mark
Hunt, John (Bromley) Pearson, Sir Frank (Clitheroe) Wylie, N. R.
Hutchison, Michael Clark Peel, John Yates, William (The Wrekin)
Iremonger, T. L. Percival, Ian Younger, Hn. George
Irvine, Bryant Godman (Rye) Peyton, John
Jenkin, Patrick (Woodford) Pickthorn, Rt. Hn. Sir Kenneth TELLERS FOR THE NOES:
Jennings, J. C. Pike, Miss Mervyn Mr. MacLaren and Mr. Pym.
Johnson Smith, G. (East Grinstead) Pitt, Dame Edith
Mr. MacDermot

I beg to move, Amendment No. 103, Schedule 9, in page 95, line 38, at the end to insert: 4.—(1) Capital gains tax chargeable on gains accruing—

  1. (a) on the disposal of assets deemed to have been disposed of by a deceased person on his death, or
  2. (b) on the disposal of settled property deemed to be effected on any occasion in 1970 accordance with subsection (3) or subsection (4) of section 24 of this Act,
being chargeable gains accruing—
  1. (i) on the disposal of land or an estate or interest in land, or
  2. (ii) on the disposal of shares or securities of a company the value of which at the time of the disposal is to be ascertained for the purposes of estate duty duty under section 55 of the Finance Act 1940 (valuation 1971 by reference to assets of the company) or the corresponding enactment forming part of the law of Northern Ireland, or would fall to be so ascertained if estate duty were leviable on the shares or securities on a death at the time of the disposal, or
  3. (iii) where the Board are satisfied that the capital gains tax chargeable on gains accruing on the disposal of any shares or securities of a company not falling within paragraph (ii) above, and not quoted on a recognised stock exchange in the United Kingdom or elsewhere, cannot be paid at once without undue hardship, on the disposal of those shares or securities,
may, at the option of the personal representatives or as the case may be of the trustees, be paid by eight equal yearly instalments or sixteen half-yearly instalments, but subject to the payment of interest under sections 495 to 497 of the Income Tax 1952 as applied by this Schedule. (2) The first instalment shall be due at the expiration of twelve months from the time of the disposal and the interest on the unpaid portion of the tax shall be added to each instalment and paid accordingly; but the tax for the time being unpaid, with interest to the date of payment, may be paid at any time and, if the property is disposed of for valuable consideration, shall become due and payable on the disposal. (3) If relief is given under section 23(2) or section 24(4A) of this Act in respect of an aggregate sum which includes gains to which this paragraph applies and other gains, then for the purpose of ascertaining the amount of capital gains tax chargeable on the gains to which this paragraph applies, that relief shall be treated as having been applied rateably in respect of tax on those respective gains. In Committee, we had quite a considerable debate, I think initiated by the right hon. Gentleman the Leader of the Liberal Party, on the incidence of the charge to Capital Gains Tax when assets are passed on death and also in the case of a notional disposal by trustees, and it was pointed out that in some of these cases, particularly with certain forms of assets, there would be difficulty in finding the money to pay the tax. Now it is of course a matter of Estate Duty practice in such cases to allow time to pay over a period of years, and it has been the intention all along to apply similar provisions for the purpose of the Capital Gains Tax, but in view of the arguments in Committee we have acceded to the request that this procedure should be formally written into the Bill, and that is what this Amendment proposes to do.

It makes statutory provision for payment by instalments of gains accruing either at death or on a notional disposal by trustees. It will not apply to gifts because we take the view that a gift by its nature is a voluntary act and that the donor is not obliged to make it unless he is in a position to make provision for any tax which is payable. It will be restricted to cases where their assets are of an illiquid nature, that is to say land, a controlling interest in private companies, and where the Board is satisfied that hardship would otherwise result, and unquoted shares. The instalment provisions will be at the option of the personal representatives or trustees, and tax can be paid over eight equal yearly instalments or in 16 half-yearly instalments, with interest at a rate of 3 per cent. on amounts outstanding.

The final point I would make is that if the property in respect of the gains on the disposal of which the tax is being paid by instalments is itself disposed of, the tax becomes payable forthwith.

Mr. Peter Walker

We very much regret that the Government have decided to add to the heavy burden of death duties by adding Capital Gains Tax at death, but we are pleased that they have tabled this Amendment, which makes similar provisions to those for death duties. I recommend my hon. Friends to support it.

Amendment agreed to.

Further consideration of the Bill, as amended, adjourned.—[Mr. George Rogers.]

Bill, as amended, to be further considered Tomorrow.

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