HC Deb 21 June 1965 vol 714 cc1325-7
Sir Eric Fletcher

I beg to move Amendment No. 691, in page 94, line 47, at the end to insert: but with such reduction, if any, as may be just in respect of distributions made for the period to persons other than participators and associates of participators (or amounts treated as such for purposes of section 72 above):".

The Chairman

With Amendment No. 691 we may take Amendment No. 692, in page 95, leave out lines 12 to 17.

Sir Eric Fletcher

These two Amendments are interrelated. They are very little more than drafting Amendments. In effect, the proviso to subsection (4) in the Bill as printed is deleted and the operative words are transposed as part of subsection (2). The object of the proviso was to ensure that the participators of a close company are not themselves charged for Surtax by reason of the payment of excess remuneration, which would be disallowed under Clause 69, to a director who is not a participator. It is more convenient and more favourable if the proviso forms part of subsection (2) rather than a proviso to subsection (4).

Mr. Patrick Jenkin

It must be a novel case when the word "just" is introduced in such a context as this, in a taxing Statute. It used to be said in relation to the equity as administered in the Courts of Chancery that the equity would vary with the length of the Lord Chancellor's foot. We now seem to have this concept transposed into the taxing Statute where the assessment seems to vary with the weight of the Minister's fortfolio. [HON. MEMBERS: "He has not got one."] If he had one.

I would have thought that in relation to taxation one wants to keep the element of discretion on the part of the inspectors of taxes down to the absolute minimum. We have already discussed the transference of the whole of this function of making directions on close companies from the special commissioners to the inspectors. Now we are giving them a very wide discretion in these words that are transposed from the proviso to sub-Clause 4 in relation to the amount that shall be disallowed in respect of directors' remuneration. I would have thought that this was not a very good thing to rule.

It has often been said that there is no equity in the taxing statutes and that there should be as little room as possible for exercise of the individual discretion of the inspector when it is written in a Statute of this sort. The Statute should try to lay down what is to be regarded as just. It is what Parliament feels and not what the inspector feels is just which should be the test in levying taxes.

Sir Eric Fletcher

I do not dissent in general from the hon. Gentleman's observations. It is right that we should reduce to a minimum the occasions on which an element of discretion is left to the inspector.

It is not correct, as the hon. Gentleman suggested, that this is a novel provision. It is not unique. There is precedent for it. In this case, this is the only solution, I think, which could be found. The Amendment is designed to substitute this provision in a part of the Clause more favourable to the taxpayer than it would be if it were left in subsection (4). The object of the Amendment is to ensure that there will be excluded from any liability on any part of the profits which would otherwise be subject to Surtax that part of the profits which are represented by an excess distribution to a director.

I have given this matter very considerable thought, and it seems to me completely impossible, without a very elaborate provision, to do more than leave the operation of this part of the Bill to the discretion of the inspector of taxes.

Amendment agreed to.

Further Amendments made: In page 95, line 3, leave out "or (5)". In page 95, leave out lines 12 to 17.—[Sir Eric Fletcher.]

Sir Eric Fletcher

I beg to move Amendment No. 723, in page 95, line 43, to leave out from "and" to "amounts" in line 44 and insert: no individual shall be charged to surtax by virtue of any apportionment under this section unless the sum or (where there is a sub-apportionment) aggregate sum on which he is so chargeable". Although Amendment No. 630—in line 36, to leave out "subsection (3) above" and to insert "this section"—has not been selected, those who tabled it will have realised that Amendment No. 723 is designed to give effect to it. I should like to pay tribute for the fact that the point which the hon. Members in question intended to give effect to is a good point which has not escaped the attention of my right hon. and hon. Friends. This Amendment will serve in somewhat different language to give effect to what they were contemplating.

Mr. van Straubenzee

My hon. Friends and I are grateful for one more of the long line of compliments from the occupants of the Government Front Bench for the improvements in drafting which are consequential on the very careful and detailed examination which we on this side of the Committee have given to the Bill. I should be churlish if I did not acknowledge that the Government have met the point which clearly they had not appreciated until Amendment No. 630 was tabled.

I am still of the view that the drafting of our Amendment is tidier than that of the Government's Amendment, but I do not want, at this hour, to hold up our proceedings, apart from expressing my appreciation to the Government for meeting the point.

Mr. Barber

If at any time my hon. Friends can be of further assistance, the Minister without Portfolio has only to let us know.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.