§ Mr. Joel Barnett (Heywood and Royton)
I beg to move Amendment No. 351, in page 13, line 12, to leave out from "the" to "disposal" in line 13 and to insert "market value on".
My intention is simply to be helpful and it may well be that what my colleagues and I propose in this Amendment is covered somewhere else in the Bill. If that is so, I should be delighted to have that assurance from my hon. and learned Friend the Financial Secretary to the Treasury. Our intention is to remove any positive encouragement to avoidance or evasion. I am sure that all hon. Members will be in favour of such an Amendment. Indeed, yesterday, hon. Members opposite made it clear that they were fair, reasonable and logical. At least, that is what they told us and, of course, we accept it. I am, therefore, able to assume that they will accept this Amendment.
I call in aid Clause 21(4), which uses the words,… market value and arm's length …in this connection. The words "arm's length" are used throughout the tax system and have been for a long time. Indeed, in Section 12(3) of the Finance Act, 1962, the same words are used. In this Clause, however, these words will not be used and I believe that this may leave a considerable loophole.
I would rather see a much simpler tax system and if, in this way, one could reduce the work of accountants and others in the professions, I would be delighted. I am speaking, of course, purely for my? 244 self and not for my association. I might perhaps add that my association, when it speaks in connection with the Finance Bill, does not speak for me—which is, perhaps, not surprising because, on its executive, there is a member of the Front Bench opposite.
I make it clear in referring to this Amendment that I do not pretend that it would stop the search for methods of tax avoidance generally. Indeed, I never could. Of course, it is right that people throughout the country, taxpayers generally, should be able to look for methods of reducing their tax liability in the same way as hon. Members are entitled to claim the maximum genuine expenses and so reduce their own tax liability.
I submit that the Amendment would made the law sensible. I do not claim any more for it. Really to stop or slow down the desire for tax avoidance generally, we would need, as I have suggested on previous occasions, to widen the whole tax base and reduce the incidence of tax itself. From my experience, where the rates of tax are low there is a direct correlation with avoidance and evasion. This goes right throughout the tax system. We see it in Purchase Tax particularly. Where the tax rates are low, then the desire for avoidance is equally low and I would personally like to see a much wider tax base and a much lower tax rate generally. [HON. MEMBERS: "Hear, hear."] I hope that hon. Members opposite who are agreeing with me will cheer as much when I express my hope and expectation that the next Budget will contain, for example, a reduction of about 2s. in the standard rate of Income Tax.
Order. The hon. Gentleman must keep to the Amendment. We have only one Budget to consider at the moment.
§ Mr. Barnett
I was seeking to relate the Amendment, Dr. King, to the whole question of tax avoidance. But I realise that I must stick rigidly to the Clause. The Amendment seeks to delete a small loophole. Many loopholes will remain, and no doubt others will be found, but if my hon. and learned Friend is able to assure me that somewhere else in the Bill the point is covered, I will be delighted. Alternatively, if he does not 245 like the form of words used perhaps he will accept the principle. As I have said, it is not possible to block all the loopholes and, indeed, I would not wish to do so, because to attempt it would entail going to totalitarian lengths. I trust, therefore, that I may have an assurance from my hon. and learned Friend on this point.
It will, I think, be for the convenience of the Committee if we discuss, at the same time, Amendment No. 352, standing in the name of the hon. Member for Ashton-under-Lyne (Mr. Sheldon), in page 33, line 3, to leave out from first "the" to "disposal" in line 4 and to insert "market value on".
§ The Financial Secretary to the Treasury (Mr. Niall MacDermot)
Without following my hon. Friend the Member for Heywood and Royton (Mr. Barnett) into a wider debate on tax avoidance, I think that I can give him the assurance that he seeks. As I understand, what he and his hon. Friends are concerned about is lest it should be possible for people, on disposing of chattels, to avoid tax by an arrangement whereby there is an artificially, low price in a sale which is not a sale at arm's length or, at the time of disposal, by gift at an artificially low valuation which would be relevant for the assessment of tax. That, however, is not so.
The reason is—if I can give a legalistic answer—that Clause 16(10) provides that Clause 17 must be construed as one with Chapter II of Part II of the Finance Act, 1962. That brings into operation the provisions of Clause 12(3) of the 1962 Act, so if it is a sale between connected persons or if the article is given away, then the market value will be substituted for
§ a consideration actually paid, or, equally, if there is no consideration, as in the case of a gift. I think that meets the point put by my hon. Friend.
§ Mr. Barnett
I thank my hon. and learned Friend for that reply. I understand that Clause 16(10) means that the point is covered and I therefore beg to ask leave to withdraw the Amendment.
§ Amendment by leave withdrawn.
§ Mr. Peter Walker (Worcester)
Dr. King, I thank you for listening to the representations of my right hon. Friend yesterday concerning the Amendment I am about to move and dividing up the debate on the short-term and long-term aspects. I speak on behalf of my right hon. and hon. Friends when I say that we prefer to debate this when we come to the long-term aspects of the Capital Gains Tax.
Therefore, I beg formally to move, in page 13, line 13, to leave out "one" and to insert "five".
I would remind the Committee of the significance of what has been said by the hon. Member for Worcester (Mr. Peter Walker). Amendments No. 203, No. 204 and No. 205, all standing in the name of the right hon. Member for Harrogate (Mr. Ramsden) and the names of other hon. Gentlemen, which relate to Clause 29 and which we had proposed to discuss with the Amendment just moved, will now be taken and debated in full when the opportunity comes.
§ Question put, That "one" stand part of the Clause:—
§ The Committee divided: Ayes 200, Noes 194.249
|Division No. 128.]||AYES||[3.59 p.m.|
|Abse, Leo||Buchan, Norman (Renfrewshire, W.)||Diamond, John|
|Albu, Austen||Butler, Herbert (Hackney, C.)||Doig, Peter|
|Allaun, Frank (Salford, E.)||Callaghan, Rt. Hn. James||Donnelly, Desmond|
|Allen, Scholefield (Crewe)||Carmichael, Neil||Driberg, Tom|
|Armstrong, Ernest||Carter-Jones, Lewis||Duffy, Dr. A. E. P.|
|Atkinson, Norman||Castle, Rt. Hn. Barbara||Dunn, James A.|
|Barnett, Joel||Chapman, Donald||Edelman, Maurice|
|Baxter, William||Craddock, George (Bradford, S.)||Edwards, Rt. Hn. Ness (Caerphilly)|
|Bence, Cyril||Crawshaw, Richard||Edwards, Robert (Bilston)|
|Bennett, J. (Glasgow, Bridgeton)||Crossman, Rt. Hn. R. H. S.||English, Michael|
|Blenkinsop, Arthur||Cullen, Mrs. Alice||Ennals, David|
|Boardman, H.||Dalyell, Tam||Evans Ioan (Birmingham, Yardley)|
|Boston, T. G.||Davies, C. Elfed (Rhondda, E.)||Fernyhough, E.|
|Bowden, Rt. Hn. H. W. (Leics S.W.)||Davies, Harold (Leek)||Fletcher, Sir Eric (Islington, E.)|
|Braddock, Mrs. E. M.||Davies, S. O. (Merthyr)||Fletcher, Ted (Darlington)|
|Bray, Dr. Jeremy||de Freitas, Sir Geoffrey||Fletcher, Raymond (Ilkeston)|
|Brown, Hugh D. (Glasgow, Provan)||Delargy, Hugh||Floud, Bernard|
|Brown, R. W. (Shoreditch & Fbury)||Dell, Edmund||Foley, Maurice|
|Foot, Sir Dingle (Ipswich)||MacCoil, James||Rhodes, Geoffrey|
|Fraser, Rt. Hn. Tom (Hamilton)||MacDermot, Niall||Richard, Ivor|
|Freeson, Reginald||McGuire, Michael||Roberts, Albert (Normanton)|
|Galpern, Sir Myer||McKay, Mrs. Margaret||Roberts, Goronwy (Caernarvon)|
|Garrett, W. E.||Mackenzie, Gregor (Rutherglen)||Robertson, John (Paisley)|
|Garrow, A.||Mackie, John (Enfield, E.)||Robinson, Rt. Hn.K.(St.Pancras,N.)|
|George, Lady Megan Lloyd||McLeavy, Frank||Rodgers, William (Stockton)|
|Ginsburg, David||MacMillan, Malcolm||Rogers, George (Kensington, N.)|
|Gourlay, Harry||MacPherson, Malcolm||Rose, Paul B.|
|Grey, Charles||Mahon, Simon (Bootle)||Ross, Rt. Hn. William|
|Griffiths, David (Rother Valley)||Manuel, Archie||Sheldon, Robert|
|Griffiths, Rt. Hn. James (Llanelly)||Mapp, Charles||Shinwell, Rt. Hn. E.|
|Griffiths, Will (M'chester, Exchange)||Marsh, Richard||Shore, Peter (Stepney)|
|Gunter, Rt. Hn. R. J.||Mason, Roy||Short,Rt.Hn.E.(N'c'tle-on-Tyne,C.)|
|Hamilton, William (West Fife)||Mellish, Robert||Short, Mrs. Renée (W'hampton,N.E.)|
|Hannan, William||Mendelson, J. J.||Silkin, John (Deptford)|
|Harper, Joseph||Millan, Bruce||Silverman, Julius (Aston)|
|Hart, Mrs. Judith||Miller, Dr. M. S.||Slater, Mrs. Harriet (Stoke, N.)|
|Hattersley, Roy||Milne, Edward (Blyth)||Small, William|
|Hazell, Bert||Monslow, Walter||Smith, Ellis (Stoke, S.)|
|Henderson, Rt. Hn. Arthur||Morris, Charles (Openshaw)||Snow, Julian|
|Herbison, Rt. Hn. Margaret||Morris, John (Aberavon)||Soskice, Rt. Hn. Sir Frank|
|Hill, J. (Midlothian)||Murray, Albert||Stones, William|
|Hobden, Dennis (Brighton, K'town.)||Neal, Harold||Strauss, Rt. Hn. G. R. (Vauxhall)|
|Holman, Percy||Noel-Baker, Francis (Swindon)||Summerskill, Hn. Dr. Shirley|
|Howarth, Robert L. (Bolton, E.)||Noel-Baker,Rt.Hn.Philip(Derby,S.)||Swain, Thomas|
|Howell, Denis (Small Heath)||Ogden, Eric||Swingler, Stephen|
|Hoy, James||Oram, Albert E. (E. Ham, S.)||Taylor, Bernard (Mansfield)|
|Hughes, Cledwyn (Anglesey)||Orme, Stanley||Thomas, George (Cardiff, W.)|
|Hughes, Emrys (S. Ayrshire)||Owen, Will||Thomas, Iorwerth (Rhondda, W.)|
|Hunter, Adam (Dunfermline)||Page, Derek (King's Lynn)||Tinn, James|
|Hunter, A. E. (Feltham)||Palmer, Arthur||Urwin, T. W.|
|Hynd, John (Attercliffe)||Pannell, Rt. Hn. Charles||Wainwright, Edwin|
|Irvine, A. J. (Edge Hill)||Park, Trevor (Derbyshire, S.E.)||Walden, Brian (All Saints)|
|Irving, Sydney (Dartford)||Parker, John||Walker, Harold (Doncaster)|
|Jones, Dan (Burnley)||Pavitt, Laurence||White, Mrs. Eirene|
|Jones, J. Idwal (Wrexham)||Pearson, Arthur (Pontypridd)||Whitlock, William|
|Jones, T. W. (Merioneth)||Peart, Rt. Hn. Fred||Wilkins, W. A.|
|Kelley, Richard||Pentland, Norman||Willey, Rt. Hn. Frederick|
|Kerr, Mrs. Anne (R'ter & Chatham)||Popplewell, Ernest||Williams, Alan (Swansea, W.)|
|Kerr, Dr. David (W'worth, Central)||Prentice, R. E.||Willis, George (Edinburgh,E.)|
|Lawson, George||Price, J. T. (Westhoughton)||Wilson, Rt. Hn. Harold (Huyton)|
|Lee, Rt. Hn. Frederick (Newton)||Probert, Arthur||Wilson, William (Coventry, S.)|
|Lee, Miss Jennie (Cannock)||Pursey, Cmdr. Harry||Winterbottom, R. E.|
|Lever, L. M. (Ardwick)||Randall, Harry||Woodburn, Rt. Hn. A.|
|Lewis, Arthur (West Ham, N.)||Rankin, John||Woof, Robert|
|Lewis, Ron (Carlisle)||Redhead, Edward||Zilliacus, K.|
|Lipton, Marcus||Rees, Merlyn|
|McBride, Neil||Reynolds, G. W.||TELLERS FOR THE AYES:|
|Mr. O'Malley and Mr. Howie.|
|Agnew, Commander Sir Peter||Campbell, Gordon||Gibson-Watt, David|
|Alison, Michael (Barkston Ash)||Carr, Rt. Hn. Robert||Giles, Rear-Admiral Morgan|
|Allason, James (Hemel Hempstead)||Chichester-Clark, R.||Gilmour, Ian (Norfolk, Central)|
|Anstruther-Gray, Rt. Hn. Sir W.||Clark, William (Nottingham, S.)||Gilmour, Sir John (East Fife)|
|Astor, John||Cooke, Robert||Glover, Sir Douglas|
|Awdry, Daniel||Cooper, A. E.||Goodhew, Victor|
|Baker, W. H. K.||Cooper-Key, Sir Neill||Gower, Raymond|
|Barber, Rt. Hn. Anthony||Corfield, F. V.||Grant, Anthony|
|Barlow, Sir John||Costain, A. P.||Gresham-Cooke, R.|
|Batsford, Brian||Craddock, Sir Beresford (Spelthorne)||Griffiths, Eldon (Bury St. Edmunds)|
|Bennett, Sir Frederic (Torquay)||Crawley, Aidan||Griffiths, Peter (Smethwick)|
|Bennett, Dr. Reginald (Gos & Fhm)||Cunningham, Sir Knox||Grimond, Rt. Hn. J.|
|Berry, Hn. Anthony||Dalkeith, Earl of||Gurden, Harold|
|Bessell, Peter||Dance, James||Hall, John (Wycombe)|
|Biggs-Davison, John||Davies, Dr. Wyndham (Perry Barr)||Hall-Davis, A. G. F.|
|Birch, Rt. Hn. Nigel||d'Avigdor-Goldsmid, Sir Henry||Hamilton, Marquess of (Fermanagh)|
|Black, Sir Cyril||Dean, Paul||Hamilton, M. (Salisbury)|
|Blaker, Peter||Digby, Simon Wingfield||Harris, Frederic (Croydon, N.W.)|
|Box, Donald||Dodds-Parker, Douglas||Harvey, John (Walthamstow, E.)|
|Boyd-Carpenter, Rt. Hn. J.||Doughty, Charles||Harvie Anderson, Miss|
|Boyle, Rt. Hn. Sir Edward||Douglas-Home, Rt. Hn. Sir Alec||Heald, Rt. Hn. Sir Lionel|
|Brewis, John||du Cann, Rt. Hn. Edward||Hendry, Forbes|
|Brinton, Sir Tatton||Eyre, Reginald||Hiley, Joseph|
|Bromley-Davenport,Lt.-Col.Sir Walter||Farr, John||Hill, J. E. B. (S. Norfolk)|
|Brooke, Rt. Hn. Henry||Fisher, Nigel||Hirst, Geoffrey|
|Bruce-Gardyne, J.||Fletcher-Cooke, Charles (Darwen)||Hooson, H. E.|
|Bryan, Paul||Fletcher-Cooke, Sir John (S'pton)||Hopkins, Alan|
|Buchanan-Smith, Alick||Fraser, Rt Hn Hugh(St'fford&Stone)||Hordern, Peter|
|Burden, F. A.||Fraser, Ian (Plymouth, Sutton)||Hornsby-Smith, Rt. Hn. Dame P.|
|Buxton, Ronald||Gammans, Lady||Howe, Geoffrey (Bebington)|
|Hunt, John (Bromley)||Monro, Hector||Smyth, Rt. Hn. Brig. Sir John|
|Hutchison, Michael Clark||More, Jasper||Spearman, Sir Alexander|
|Irvine, Bryant Godman (Rye)||Morrison, Charles (Devizes)||Stainton, Keith|
|Jenkin, Patrick (Woodford)||Mott-Radclyffe, Sir Charles||Stanley, Hn. Richard|
|Jennings, J. C.||Munro-Lucas-Tooth, Sir Hugh||Steel, David (Roxburgh)|
|Johnson Smith, G. (East Grinstead)||Neave, Airey||Stodart, Anthony|
|Jopling, Michael||Nicholls, Sir Harmar||Stoddart-Scott, Col. Sir Malcolm|
|Joseph, Rt. Hn. Sir Keith||Nicholson, Sir Godfrey||Studholme, Sir Henry|
|Kaberry, Sir Donald||Noble, Rt. Hn. Michael||Summers, Sir Spencer|
|Kerby, Capt. Henry||Nugent, Rt. Hn. Sir Richard||Taylor, Sir Charles (Eastbourne)|
|Kerr, Sir Hamilton (Cambridge)||Onslow, Cranley||Taylor, Edward M. (G'gow,Cathcart)|
|Kilfedder, James A.||Orr-Ewing, Sir Ian||Taylor, Frank (Moss Side)|
|King, Evelyn (Dorset, S.)||Osborn, John (Hallam)||Thatcher, Mrs. Margaret|
|Kitson, Timothy||Osborne, Sir Cyril (Louth)||Thompson, Sir Richard (Croydon,S.)|
|Lagden, Godfrey||Page, John (Harrow, W.)||Thorneycroft, Rt. Hn. Peter|
|Lambton, Viscount||Page, R. Graham (Crosby)||Tiley, Arthur (Bradford, W.)|
|Lancaster, Col. C. G.||Pearson, Sir Frank (Clitheroe)||Turton, Rt. Hn. R. H.|
|Langford-Holt, Sir John||Peyton, John||Tweedsmuir, Lady|
|Legge-Bourke, Sir Harry||Pitt, Dame Edith||van straubenzee, W. R.|
|Lloyd,Rt.Hn.Geoffrey(Sut'nC'dfield)||Pounder, Rafton||Vaughan-Morgan, Rt. Hn. Sir John|
|Lloyd, Rt. Hn. Selwyn (Wirral)||Powell, Rt. Hn. J. Enoch||Walder David (High Peak)|
|Longbottom, Charles||Prior, J. M. L.||Walker, Peter (Worcester)|
|Loveys, Walter H.||Pym, Francis||Walters, Dennis|
|Lubbock, Eric||Ramsden, Rt. Hn. James||Ward, Dame Irene|
|McAdden, Sir Stephen||Redmayne, Rt. Hn. Sir Martin||Weatherill, Bernard|
|MacArthur, Ian||Renton, Rt. Hn. Sir David||Webster, David|
|Mackenzie, Alasdair (Ross&Crom'ty)||Ridley, Hn. Nicholas||Whitelaw, William|
|Mackie, George Y. (C'ness & S'land)||Ridsdale, Julian||Williams, Sir Rolf Dudley (Exeter)|
|McMaster, Stanley||Roberts, Sir Peter (Heeley)||Wills, Sir Gerald (Bridgwater)|
|McNair-Wilson, Patrick||Robson Brown, Sir William||Wilson, Geoffrey (Truro)|
|Marples, Rt. Hn. Ernest||Russell, Sir Ronald||Wise, A. R.|
|Maude, Angus||St. John-Stevas, Norman||Wood Rt. Hn. Richard|
|Maydon, Lt.-Cmdr. S. L. C.||Scott-Hopkins, James|
|Meyer, Sir Anthony||Sharples, Richard|
|Mills, Peter (Torrington)||Sinclair, Sir George||TELLERS FOR THE NOES:|
|Mills, Stratton (Belfast, N.)||Smith, Dudley (Br'ntf'd & Chiswick)||Mr. McLaren and Mr. R. W. Elliott.|
§ Mr. MacDermot
I beg to move Amendment No. 121, in page 13, line 31, after "and", to insert"(a)".
Perhaps it would be convenient if, with this Amendment, we discussed also Amendment No. 122, in page 13, line 32, after "person", to insert:or(b) to persons who are acting in concert or who are, in the terms of paragraph 21 of Schedule 7 to this Act, connected persons".These Amendments are designed to ensure that the exemption limit for chattels under Clause 17 cannot be avoided by selling the component parts of a set of chattels one by one, in reality to the same buyer but through intermediaries who are either connected with him or acting in concern that whim. We have already had reference to this loophole in the Bill as it stands and quite clearly if we are to have this provision relating to a set of articles we must see that it cannot be avoided by the simple expedient of people being able to sell through an intermediary acting in concert with them.
§ Amendment agreed to.
Further Amendment made: In page 13, line 32, after "person", insert:
(b) to persons who are acting in concert
or who are, in the terms of paragraph 21 of Schedule 7 to this Act, connected persons".—[Mr. MacDermot.]
§ Mr. MacDermot
I beg to move Amendment No. 123, in page 13, line 34, at the end to insert:but with any necessary apportionments of the reductions in tax, and in allowable losses, under subsections (1) and (2) of this section".This Amendment is designed to bring the present wording of subsection (3) of Clause 17 into line with the first and comparable pant of subsection (4) of Clause 29. There are similar words in Clause 29 and by an error they were omitted in the drafting of this Clause. The effect is to permit apportionments in cases where a set of articles is required for the purposes of this Clause to be treated as a single asset and where not all the articles comprising the set but only one or some of them are disposed of on a particular occasion.
§ Amendment agreed to.
§ Clause, as amended, ordered to stand part of the Bill.