HC Deb 31 May 1965 vol 713 cc1228-61
The Minister without Portfolio (Sir Eric Fletcher)

I beg to move Amendment No. 436, in page 39, line 8, at the beginning to insert: Subject to subsection (2) of this section".

The Temporary Chairman (Sir Herbert Butcher)

I think that it might be convenient to discuss also Amendment No. 437.

Sir Eric Fletcher

I agree, Sir Herbert. It is the Amendment of substance. These Amendments are designed to prevent a possible avoidance of Capital Gains Tax by the use of time charities. The Clause exempts charities from Capital Gains Tax, and the exemption is intended to apply to charities pure and simple, in other words, permanent charities. Where a charity was set up in such a way that the income was payable for charitable objects only for a limited time, and then the capital would revert to the settlor, it would be improper for such a charity to obtain permanent exemption.

Therefore the Amendment seeks to provide that those gains which arise on the assets and which are spent for charitable purposes will be exempt, but if they are merely accumulated and, at the end of the day, are distributed to persons who are not exempted as charities, the advantage of that provision will be withdrawn.

6.0 p.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

I do not think that anyone will quarrel with this addition to the Bill. There is one matter, however, that I want to have clarified. In the last part of Amendment No. 437 there is reference to the making of assessments at any time not more than three years after the end of the year of assessment and so on. This seems to me to be adding unnecessary delay and confusion. I agree that the trust would be assessable for Capital Gains Tax on the change of beneficial owner, but what is the purpose of delaying the assessment, or giving the Inland Revenue power to delay it, for three years? I cannot believe that the suggestion is that the original valuation may have been incorrect. This seems to be simply a case of giving the Inland Revenue a free option. Perhaps the hon. Gentleman can state why this period has been included.

Sir Eric Fletcher

If the hon. Member understood the object of this part of the Clause he would know that it is not intended that there should be any delay in the assessment. But there may be circumstances in which it is not possible for the Inland Revenue to make an assessment within three years. We are dealing here with the case where a trust provides partially for charitable benefits, which come to an end in circumstances in which the capital reverts to the settlor or to some other individual who is not exempt. In those circumstances, when the availability of income for charitable purposes ceases and there is a reversion, it is right that the trustees should be liable to Capital Gains Tax on the capital improvement of the corpus of the trust.

It may be that the facts would not become known in time to enable the Inland Revenue to make an assessment within three years. It is intended that the assessment should be made as soon as possible, but it is obviously desirable that the period of time in which an assessment should be made in this case should be three years.

Sir H. d'Avigdor-Goldsmid

I do not understand what the hon. Member means by "if the facts were not known". We are speaking of a valuation which must be carried out by law, and for which the trustees are responsible. This is something to which they have put their names. I do not understand why the facts should not be known in such a context. It is for the trustees to produce the valuation and for the Inland Revenue to accept or challenge it. It is not for the Inland Revenue to delay for three years.

Sir Eric Fletcher

There is no intention to delay. The subsection merely provides that the assessment shall be made not more than three years after the year of assessment.

Amendment agreed to.

Mr. Peter Walker

I beg to move Amendment No. 242, in page 39, line 10, at the end to insert: (1A) A charity holding shares in an investment trust to which section 34 of this Act applies shall be entitled to be repaid the amount of the tax charged on the investment trust in any accounting period which—

  1. (a) has been deducted in computing the total net gains of the trust in that period; and
  2. (b) is attributable to the amount of the total net gains apportioned under section 63 of this Act to the shareholding of the charity.

The Temporary Chairman

I think that it will be convenient if, with this Amendment the Commitee discusses Amendment No. 243, in page 40, line 3, at end add: (3) Where a fund being either such a fund as is referred to in subsection (1) of this section or a fund the income of which is exempt from tax under any of the enactments mentioned in subsection (2) thereof holds shares in an investment trust to which section 34 of this Act applies the provisions of subsection (1A) of section 32 of this Act shall apply to that shareholding as they apply to the shareholding of a charity in such an investment trust: Provided that if part only of such a fund as is referred to in the said subsection (1) has been approved the entitlement to repayment shall be restricted to such proportion of the amount of the tax as corresponds to the proportion of the chargeable gain that would be exempt under subsection (1) of this section.

Mr. Walker

Yes, Sir Herbert. Hon. Members on both sides of the Committee agree that charities and superannuation funds should not be subject to Capital Gains Tax. That is why my hon. Friends and I have tabled these Amendments, presuming that this is yet another tentative Clause and that the Government really mean to uphold the principle that charities should not pay Capital Gains Tax.

At the moment, any charity which invests in an investment trust or a unit trust—and many charities do so—would be subject to Capital Gains Tax on all the capital gains which accrue from the investment trust or unit trust. Those gains would be taxed at the rate of 35 per cent. A small charity may decide that it does not have the necessary "know-how" to handle its investment funds, and may therefore put its investments into a certain investment trust, where they will enjoy professional management and a spread of investments. Under the terms of the Bill the investment trust would pay 35 per cent. tax on any capital gains taking place within the trust.

Under another Clause, however, the charity would presumably have credited to it and set off against any realisation the amount of Capital Gains Tax paid. But the charity never becomes subject to Capital Gains Tax. We therefore have the position in which it will be allowed this amount, in terms of setting off any capital gains it makes, but will never benefit because it will never be charged on its capital gains. The Amendment therefore provides that the amount of tax charged on the investment trust during the relevant period shall be paid in money to the charity concerned. To any person who wishes charities to be exempt from this provision the Amendment will appear to be reasonable and right.

Amendment No. 243 involves some more complicated considerations. It applies particularly to superannuation funds. Only some superannuation funds are affected by the Clause. Basically, they are those funds which come under the terms of Section 379 of the 1952 Income Tax Act. Some very important funds come partially under that Section, and those funds will benefit to some extent from the provisions of the Clause—but only to the extent that those funds are invested under that Section.

This will give rise to considerable difficulties. What happens if one of these funds which is partially affected by that Section has unrealised gains as a result of providing for the reserve in its superannuation fund? Although this may be more suitable for discussion on the Question, "That the Clause stand part of the Bill", I mention it now because it is probably more convenient for the Chief Secretary to deal with the matter in its entirety.

In the case that I have put forward the fund would be making certain capital gains which would not be covered by the Clause, and this would presumably require a potential reserve to be held against them. The fund would be in a quandary about what it was able to pay out in terms of benefits, and whether benefits paid out would be subject to future capital assessments. Therefore, there is a real difficulty.

There is also the effect that if members are transferred to another superannuation fund, and the securities are transferred from one to another which is not covered by the provisions of Section 379, there would be a realisation, and Capital Gains Tax would be paid. If it were paid by the fund which the members were leaving, that would be unfair to the remaining members. If, on the other hand, it is paid off in cash, there would have been a realisation, and Capital Gains Tax would have been paid, and that would be unfair. As it is worded at present, Clause 33 will create considerable administrative difficulty regarding those funds not completely covered by Section 379.

The effect of the Amendment, which is similar to that relating to charities, is to see that any tax paid by an investment trust is repaid in respect of the investments of the superannuation funds. As at present worded, the Amendment does not include unit trusts, but if the principle is accepted, I hope that the Chief Secretary will, on Report, enable unit trusts to be included as well as investment trusts. There is a good precedent for this proposal. Superannuation funds obtain a rebate of tax on investment income at the present time and I think that exactly the same principle would apply.

When I say that about 10 million in this country are members of non-insured superannuation funds it will be realised that this is of considerable importance. Many of the funds invest heavily in investment trusts and unit trusts. A classic example is the Local Authority Mutual Investment Trust, with an investment of £40 million which is at present concerned primarily with the superannuation funds of local authorities. The present wording of Clause 33 would mean that trusts would be subject to Capital Gains Tax at the rate of 35 per cent. which in turn would affect all the local government superannuation funds invested through the trusts. There is also the Pension Equity Unit Trust which has £2. million of investments covering a substantial number of superannuation and pension funds. There are in all 171, of which 148 are covered under Section 379, but the remaining 23 are not. These are two illustrations of the unit trusts and investment trusts specifically designed to assist in the investment of superannuation funds.

If the Amendments are accepted, it would mean that smaller superannuation funds and charities unable to employ the requisite professional investment management would be able to continue to have their investments serviced by the administration of the major investment funds in the country. If the principle is allowed, unit trusts and investment trusts would probably be created specifically designed to look after superannuation funds and charities. That would ease the administrative problem for the Revenue. In that the two Amendments fit the spirit of the Clauses concerned I hope that they will prove acceptable.

The Chief Secretary to the Treasury (Mr. John Diamond)

The hon. Member for Worcester (Mr. Peter Walker) was right in saying that a charity is a charity, be it for Income Tax purposes or Capital Gains Tax purposes. If, therefore, an investment trust or a unit trust were—as one is—a charity, it would not be subject to Capital Gains Tax. That is the correct transposition of the Income Tax law to the realms of Capital Gains Tax. The hon. Member wishes to go further. Let me say straight away that we would like to see whether we can help in some way, and to consider this matter between now and Report stage, but I do not think, for reasons which I shall adduce, that it would be possible to go as far as the Opposition would wish.

6.15 p.m.

It must be appreciated that there is a distinction to be drawn between the individual and the company. A unit trust or investment trust is a company and as such is liable to the taxation on a company. Advantages to be obtained by an individual by investing through a unit trust or an investment trust are not disputed. There are the advantages of expert management and of wide spreading. These are advantages of investing through the medium of a company called a unit trust or an investment trust. This has advantages for the individual. It has certain disadvantages so far as Capital Gains Tax is concerned. It has the disadvantage that if the investor were a charity and invested directly, it would not be subject to tax on income drawn from those investments. If it chose to effect an alternative form, for which advantages are claimed, as the law now stands it could not obtain the same beneficial treatment; that is to say it could not go so far as reclaiming the Capital Gains Tax paid by the trust in respect of the charity's holding in the trust, but I repeat that a unit trust which is a charity does not attract Capital Gains Tax.

Mr. Peter Walker

I am not certain what the Chief Secretary means. Does he mean that, if a group of unit trust managers start a unit trust for the sole purpose of administering the funds of charities, that is a charity? Or does he mean that the unit trust itself is in some way a charity?

Mr. Diamond

I mean the second, but I am coming to the first. The charity would require more. It would include the second but would require more than that. It would require to be of such kind and purpose as to satisfy the Inland Review in a strict way that it was a charity. I am told that one such exists. There is nothing to prevent a unit trust being established which is a charity. In saying that, I grant that I am offering no concession because already under the provisions of the Bill a charity is not assessable, and therefore any group of charities which wished to combine and invest through the medium of an investment or a unit trust, which was itself a charity, would not need any easement from me. They are already exempt because a charity is already exempt under the Bill.

What I am considering, and what we want to see, is whether it is possible in some respects to meet the spirit of this Amendment; whether if charities did combine together to form an investment trust, which was not itself a charity but the whole of whose members were charities, and whose membership was exclusively open to charities, we could provide special regulations so that that trust could provide the kind of exemption asked for in the Amendment. But I must make it clear that we cannot accept the Amendment put forward. I do not think that it would be possible, for these reasons. I repeat, a company and its shareholders are two separate things. What is being asked for in these Amendments—[An HON. MEMBER: "The same gramophone record."]—I am sorry about the gramophone, but some hon. Gentlemen opposite have not yet got the tune off by heart. I hope that by now they have, and that I need not repeat it—[Interruption.] This is fundamental to the whole of the Bill; if it is not accepted, we do not leave square one. If we cannot agree about it, and it is not accepted, then it is just not accepted, but it is fundamental to the whole Bill. This would, perhaps, explain the different approaches to it.

For example, if what the Opposition are asking were granted, it would be sought for more than charities. It would be sought, for example, for a man paying the two-thirds rate instead of the full rate, and for the man who is not liable at all. We have that problem. The same might apply to the question which the hon. Member for Worcester asked me about superannuation funds. Some of those funds are in respect of approved schemes exclusively and others are not because they include more than approved scheme objects. It might be possible for the first category—I do not know—to group together to form an investment trust or unit trust, the members of which would be exclusively trustees of approved pension funds. If that were so, it might be possible to deal with the problem in that way.

I should like, therefore, to have the opportunity of looking at these possibilities between now and Report and considering the difficulties. Having regard to the basic principle which was observed in devising the Corporation Tax, I regret to say that, as put forward in the Amendments, the proposals are not acceptable.

Mr. Raymond Gower (Barry)

The Chief Secretary will probably recognise that there must be some disappointment in the minds of some of us on this side of the Committee. Anyone who reads the first part of Clause 32 as it stands would have the impression that the Government, in effect, intend that a gain shall not be subject as a chargeable gain if it accrues to a charity. The Chief Secretary is saying that it shall be subject if it accrues to a charity which has invested in an investment trust. In other words, although the principle—

Mr. Diamond

To be quite clear, nobody is saying that with regard to the investment made by the charity itself, that is to say, in the unit trust or in the share in the investment trust. I am saying that that part of the Capital Gains Tax is suffered by an investment trust or a unit trust, and which is, in a sense, applicable to the charity's holding, is not a proper subject for a claim for a repayment of tax by the charity.

Mr. Gower

I think that the Chief Secretary is playing with words. I still submit that what, in essence, his reply means is that, in future, those who are responsible for the administration of charities will invest in investment trusts subject only to this new penal proposition that that proportion which they put into an investment trust or, by corollary, into a unit trust, will attract a penal duty which it has not attracted in the past. To that extent, this is a blow to the choice and selectivity of those who administer the affairs of these great charities and, indeed, of those funds designed to ensure the maintenance of pensions, which are described in the other Amendment dealing with superannuation funds.

In my submission, it is proper that those who administer these funds should have the utmost discretion and that their experience and judgment should not be limited in this way. In this narrow respect, I submit to the Chief Secretary, he is limiting their choice in the future. He is saying that they can do this only subject to this new penal provision. I submit also that this is completely at variance with the spirit and purport of the main Clauses in both cases. I deeply regret that the Chief Secretary should take this attitude.

This is also a blow at the investment trust and unit trust movement. It is a deplorable blow and one which those of us who deem this movement of great value and importance will deeply regret. I must declare an interest, as I am a director of one unit trust which is established and one which is to be established, as well as of an investment trust. I do not think that that lessens the objectivity with which I make this plea to the Chief Secretary. The value of these bodies has been so established in recent years that it seems to be common knowledge that we should do everything which we can to sustain them. I deeply regret that the Chief Secretary has taken this narrow point of view, using very restricted technical words to thwart the aim clearly stated by my hon. Friend the Member for Worcester (Mr. Peter Walker) in his admirable opening speech.

Mr. Harold Lever

I am sorry to interrupt the Niagara of crocodile tears which is flowing from the other side of the Committee on the subject of charities. We have by now become accustomed to the Opposition in their cloth-cap rôle as defenders of the marginal hill farmer. We are now seeing them in the rôle of anomaly chasers on behalf of charities. I hope that I shall be treated as being reasonably impartial on this subject, because I do not like the Capital Gains Tax and I have said so. Wherever I have seen anything wrong with it, I have said so with complete freedom, both here and outside.

I do not question the sincerity of hon. Members opposite, but they have been talking more unadulterated balderdash than I have ever heard concentrated into a few minutes. To suggest that the Chief Secretary or the Chancellor should give further concessions along the lines of the Amendment is so amazing and so intellectually contemptible that I do not know how anybody has the effrontery to put it forward.

Let us pause and reflect. I am starting from the proposition that there is no taxation which is fiscally perfect. I realise now why the Government like tax upon death, why they like Capital Gains Tax to be levied on the estate when the owner has gone to receive the only perfect justice—fiscally and in other respects—which he is ever likely to know. Accordingly, I can see that this reaching-out for perfect justice compels the Government to tax upon death. If one does not expect absolutely perfect justice, one has to have some reason in one's taxation.

What the Opposition say is, "Here is a capital gain which is earned by a company in which a charity has invested. Since the charity does not pay the Capital Gains Tax, the reasonable, commonsense, big-hearted thing to do is to give a charity back the Capital Gains Tax paid by the company". The ridiculousness of this proposition can be seen by contrasting it, not with the preaching of the Conservative Party when in opposition, but with the activities of the Conservative Party when in government, when they had some sort of modest responsibility for keeping their demands within reason.

6.30 p.m.

Mr. Peter Walker

In fact, we do not say that in the Amendments at all. If we had said what the hon. Gentleman is suggesting we have said, we would have proposed that tax on any capital gains which took place within the company should be related. We have not said that tax on capital gains in the company should be rebated, but that when a charity uses managers, operating under the name of an investment trust which invests in companies, there should not be double taxation, and earlier the hon. Gentleman was against the principle of double taxation.

Mr. Lever

It is not a question of double taxation. I shall hope to be corrected if I am wrong, but what the Opposition are seeking to do is to get the Government to concede that a charity shall be rebated tax which a taxable body has paid on its own behalf merely because the charity happens to have invested in or through the medium of that organisation.

Mr. Peter Walker indicated dissent.

Mr. Lever

The hon. Gentleman shakes his head. I will yield to him and allow him to correct me and tell me what the purpose of the Amendment is, if it is not that.

Mr. Peter Walker

If a charity invests in I.C.I. and I.C.I. makes some capital gains, then we are not asking that that should be rebated, which is what the hon. Gentleman is talking about. We are saying that if the charity through an investment trust invests in I.C.I., as I.C.I. will have already paid 35 per cent. of its capital gain, the charity, or separate fund, should not be forced to pay a further 35 per cent. on the appreciation within the investment trust.

Mr. Lever

What the hon. Gentleman is seeking to do is precisely what I have described, namely, having invested in the shares of a taxable body, namely, an investment trust—whether an investment trust should or should not be subject to Capital Gains Tax is another matter—once the investment trust has paid Capital Gains Tax, because I, a charity, hold shares, I should be paid back the tax. It is argued that the Revenue is supposed to go to the point of saying that the common sense is that as the charity owns shares in the trust and is itself not a taxable individual and, as it is the policy of the law to allow the charity to go scot free, the reasonable thing is that the Revenue should pay back a proportion of the Capital Gains Tax paid by the investment trust in which I, the charity, have invested, an investment trust which is itself a taxable body and not owned exclusively by charities but also by other persons.

That will surely not stand up to any rational argument. My hon. Friend the Chief Secretary has already pointed out that there is no better claim on the part of a charity to have money back than on the part of a shareholder who is exempt from tax, and nobody has suggested that.

To show the difference which occurs to me between a company and a charity in this way, let me point out that when the Conservative Party was in office charities enjoyed some relief, not Capital Gains Tax, but from Income Tax, the analogy I want to make. A company in which a charity had invested might earn £100,000 and pay £55,000 in tax and a very small dividend. The charity could reclaim the tax on the dividend paid, but it could not reclaim the company tax because the company and the charity were two separate bodies. The policy of the law was, is and for some time has been, that the charity should not be taxed itself.

Taking a simple case of Income Tax under the existing law and the old law, a charity would be able to reclaim the tax on its dividends from the company in which it had invested, but was in no way related to and could not claim back the tax which the company paid on its trading profits. By analogy, no charity could expect to be given back the tax which had been paid by way of Capital Gains Tax on the company's capital profit any more than anybody has had the courage to suggest that charities should recover the Income Tax which companies have paid on their own behalf in respect of their trading profits.

Mr. Diamond

My hon. Friend is quite right and I am sure that he intended to go on to develop the point that when the tax is Profits Tax, as opposed to Income Tax, on the trading profits, there is no question of redemption.

Mr. Lever

The Chief Secretary has rightly anticipated me. The whole purpose of the Corporation Tax, to which the Capital Gains Tax is allied, was to have a scheme of taxation coming in—and, perfect or imperfect, it is a scheme of things and has a logic which cannot be broken up—and the logic was to produce a situation similar to that with the Corporation Tax which existed before and by which when a charity had shares in a company which paid Coroporation Tax, nobody said that the Government were being skinflint with charities because they did not allow charities to reclaim Corporation Tax.

Mr. Diamond

Profits Tax.

Mr. Lever

It was a form of Corporation Tax. The reason was very simple and it was precisely what my hon. Friend the Chief Secretary said, namely, the division of personalities for this purpose between the company and its shareholder, the charity. The charity could reclaim any tax which it had suffered, but never reclaim as if the company were its agent.

With respect, it is no good the hon. Member for Worcester (Mr. Peter Walker) blustering around the question and talking of charities investing through an investment trust. They do not invest through an investment trust, over an investment trust, or on an investment trust, but in an investment trust. They buy shares in an investment trust and when that investment trust pays tax, that is nothing to do with the charities. A charity receives back only what tax it pays itself. It cannot be honestly demanded that charities should be given relief in the anomalous way suggested.

A word is justified when considering the Amendment on the general treatment of charities by the Government, both in Capital Gains Tax and the Corporation Tax. One might have felt some sympathy with the Amendments to help charities if the Government had in some way reneged from the general position relating to charities. I am bound to say that the present law is exceedingly generous to charities, because it makes all of us, the whole body of taxpayers, partners in the generosity of anybody who gives to what is called a charity. Thus, the man who passionately believes that one should play games on Sundays pays part of his Income Tax because someone else has covenanted large sums to the Lord's Day Observance Society.

This seems to be a somewhat anomalous position which would bear consideration. I can go on with other amusing examples. The most extraordinary charitable objects are being financed by tax relief by the general body of taxpayers, objects often representing about 0.0001 per cent. of the wishes of the general body of the taxpayers who are providing so large a part of this charity. For example, Moslems provide funds for research into pig eating. Sports players finance aid to the Lord's Day Observance Society. Jews finance Catholic redemption and Wesleyan Methodists finance all sorts of joyous activities of which they would not at all approve.

I admire the generosity and breadth of mind of the Chancellor of the Exchequer in taking the opportunity, even with this general reform of the taxation system, not to disturb the privileges which charities already have. These privileges are great enough and ought not to be enlarged. It should not be forgotten that every concession made to one taxpayer represents a burden on another.

In these circumstances, my hon. Friend the Chief Secretary has made a very generous offer, namely, to consider that if a charity wishes neither directly nor indirectly to suffer this tax, all it should have to do is to get a group of like-minded charities to form an investment trust, with no shareholders other than charities, to provide the skilled investment assistance for investing their money, and the concession may then be practicable. I am not sure that that promise is not too generous, having regard to the present situation and the principles which I have enunciated.

Mr. Geoffrey Lloyd (Sutton Coldfield)

I rise unabashed as an intellectual contemptible to put one practical point to the Chief Secretary. I ought to say that I am an investment trust director and an investor in investment trusts. On my way to the practical point, I would like to put to the Chief Secretary, although not in any way a trained accountant, a point slightly different from that mentioned by his hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever). In the course of castigating my hon. Friends, I thought quite wrongly, for putting this point of view in favour of chastity—

Mr. Harold Lever

The castigation would have been much more severe in that case.

Mr. Lloyd

He emphasised the almost antiseptic difference between the personality of the company, on the one hand, and the personality of the charity or any taxpayer or investor in an investment trust, on the other. He said that it would, therefore, be a gross transgression on the essential logic of symmetry of the whole Bill if there were any blurring of this line.

I thought that the Government had already proposed that there should be a method by which the individual shareholder should have some rebatement of the capital gain which was made inside the investment company, in his character as an individual investor. I agree that many of us think that this is not a very good system, but that is not the point on this occasion. The Government have already transgressed what has been held up to be this sacred principle. Therefore, it is not unreasonable for us to take the view that they should go the whole way in dealing with a charity.

I do not wish to argue this transcendental point of tax principle, but to make a practical point. The Chief Secretary said, in a moment of wishing to make an intellectual concession to the Committee, that a charity could become an investment trust. I believe that he said that one was a unit trust. That might be an important point for big charities, but, in practice, I know, as an investment trust director, that there are many pension funds which invest in investment trusts.

The practical point I wish to put is that the problem does not arise in regard to the pension funds of, say, I.C.I. or Imperial Tobacco but that it is a difficult problem for the relatively small pension superannuation funds approved by the Revenue. I have in mind the pension fund of a small company which is run by, say, the secretary of the company who does not have very large sums at his disposal. In such a case investment trusts provide an ideal investment, for the money gets spread in a way that the secretary of such a company would not have the knowledge to spread them.

I do not wish to exaggerate the case, but if the position the Government are taking up means that they are making it less advantageous for a pension fund to invest in an investment trust than directly in industrial or financial shares—

Mr. Harold Lever

Before the right hon. Gentleman proceeds, is that not commonplace in this sort of taxation? For example, a charity might think that the most appropriate kind of investment was in a property company rather than directly in a property. Is the right hon. Gentleman suggesting that in encouraging a charity so to do, and not narrowing the field of its investment, it should be allowed to reclaim the Corporation Tax?

Mr. Lloyd

I am putting a purely practical point. If one looks at the whole range of medium and small sized companies one finds that they choose investment trusts, like small pension funds, for the practical reason that a good spread of investment and expert management is achieved. I am urging the Government to look at this practical point instead of merely giving us continual lectures in taxation theology.

Sir H. d'Avigdor-Goldsmid

In supporting the Amendment I wish, briefly, to make it clear that this is a case where the Government Front Bench, aided and abetted by the hon. Member for Manchester, Cheetham (Mr. Harold Lever), have simply muddled the issue. The issue is indeed a simple one; namely, that under Clause 34(1) a rebate is allowed to the individual investor in an investment trust or unit trust in respect of the capital gains paid by the trust.

As I understand it—and as the hon. Member for Cheetham clearly does not understand it—the object of the Amendment is to put a charity, relative to the ordinary investor, in exactly the same position whether the investment is in an investment trust or in I.C.I. The argument of the hon. Member for Cheetham falls to the ground because, no doubt, in his anxiety to cover the existing position, he did not have time to read Clause 34, although he will have plenty of time to tell us all about that.

6.45 p.m.

The Government have, for reasons which we all approve, made this exemption for charities. Thus, the object of the Clause is to maintain the position applying to charities, as the Government have accepted it, but in this case the charity is being differentiated against as compared with the ordinary investor. I believe that I see the Chief Secretary shaking his head in disagreement. If I cannot make the position clear to him now, perhaps I will have an opportunity of trying again later. I assure him that this is a relatively simple matter. I cannot understand why the Government cannot accept the Amendment. If they do not do so they are certainly being perverse.

When I say that it is the intention of the Government to bedevil the professional managements of investments I do not expect them to admit it. Indeed, they may not realise that that is what they are doing, but certainly that will be a by-product of the Bill. If the Clause goes through unamended it will mean that no charity will want to hold shares in an investment trust. A disincentive of this type is not something that can be remedied overnight and without there being a massive disturbance of the market. Up till now charities have invested largely in investment trusts, for the reasons adduced by my right hon. Friend the Member for Sutton Coldfield (Mr. Geoffrey Lloyd). Why should charities now be condemned to changing their investments and why should they be differentiated against in this way? Considering the simple point that is involved, it is regrettable that the Government have shown so little interest in it.

Mr. J. T. Price

If Amendment No. 243 means what it says, I do not think that it can be logically defended. My hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) who, as we know, is a master of hyperbole, and gentle raillery pointed out the logical flaws in it.

I should, perhaps, declare an interest, though not a personal one, in that I have been for many years a trustee of a large pension fund approved under Section 32 of the Finance Act, 1921. The history of the pension fund movement is an important social matter which we should consider. Since the original Chanter was granted in the 1921 Act, it has been the social policy of Governments in this country to encourage the pension fund movement for the simple and sound reason that where special pro- vision has been made for groups of workers, executives and others who are employed, central funds are to that extent relieved later on.

In giving further consideration, as the Chief Secretary has promised, I urge him to bear in mind that because of the changing pattern of the financial world, particularly in the last 10 to 20 years, a large number of pension fund trustees who, under legislation, were originally restricted to trustee investments and who could not invest their funds in general equities—and this applies to the fund with which I have been associated—have been forced to amend the deeds of their funds in such a way as to widen the scope of investment open to them. They have done so for very sound reasons—because of the inflationary spiral which is now a permanent feature of our society. It has been held philosophically and soundly by people whose duty it is to manage these affairs that pension funds must be geared to inflation if inflation is the order of the day.

It would help a great deal if it could be made quite clear from the Treasury Bench that it is not the intention of the Government in any way to undermine the privileges or concessions that have been available to pension funds. There may be an impression abroad, going out from this House, that the Government are doing something in some way detrimental to the existing pension funds. [Interruption.] Please allow me to put my point of view which I put as sincerely as hon. Members opposite have put theirs, not from any theoretical point of view but from a practical knowledge of affairs. I should like the assurance that it is not the intention of the Government to depart from the general exclusion from all liability for tax now enjoyed by pension funds.

There remains the doubt that, because of this change of taxation, we may get the further oblivation placed upon trustees of funds to begin a massive switch of investments because they are not so favourable as they were before. That would be a retrograde step for any Government to take.

Mr. Heath

Two important differences of view have emerged during the debate. The first was very clearly stated by the Chief Secretary when he said that a company and its shareholders were two entirely separate entities. This is the depressing thing about the whole of our debates on the Bill. There is this clear division between the two sides of the Committee.

We do not accept that there is an absolutely clear dividing line between a company and its shareholders. We could perhaps bear with the Chief Secretary if it were not for the fact that he and his colleagues have breached the principle themselves. What is more they are doing it with investment and unit trusts under the next Clause but one. It becomes all the more difficult to bear this repeated lecture about the clear distinction between the nature of a company and its shareholders. I foresee immense difficulties for us when we come to discuss the Corporation Tax if the Chief Secretary tries to maintain his position on this inviolate dyke which has already been breached.

In the debates we had on the nature of an investment trust or a unit trust the hon. Gentleman the Member for Manchester, Cheetham (Mr. Harold Lever) held the view that this is the same sort of body as a manufacturing or trading company and that all companies were exactly the same. This is not a view we hold. We believe there is a difference between a normal manufacturing trading company and the investment trust or unit trust which is concerned with the investment of small shareholders and also institutions dealing with pension funds, superannuation funds, and so on. It is because the hon. Member for Cheetham is treating these different bodies as being exactly the same that he is unable to understand the points that we are making.

I believe the hon. Gentleman the Member for Westhoughton (Mr. J. T. Price), who spoke before him, will, in fact, find that the argument of the hon. Gentleman the Member for Cheetham is not a logical one and that the result will be that the bodies with which he is concerned, superannuation and pension funds, will suffer as a result of this, and will find that they will need to reinvest their funds differently because of the Chief Secretary's action in refusing to accept the Amendment.

We regard investment or unit trusts as a means whereby those who are not able to pay for their own advice on their investments can invest wisely through an investment or a unit trust. It is not the same as putting one's money into securities of a manufacturing or trading company of the normal kind. Unless the hon. Member for Cheetham accepts this there will always be a difference of view about it and it is the one thing in the Bill, so far, which will enable him to vote in the Government Lobby, in the same way as he has expressed his view.

Mr. Harold Lever

I want to tell hon. Members opposite that they are entitled to as much good-natured fun as they can get out of the fact that I am a devoted supporter of the Government with, from time to time, the obligation of criticising them. But I never have occasion to castigate their chastity, as has been alleged against me by the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd). On the other hand, I hope that they will believe me by now that what I have said on the Bill has been said with honest conviction, although I may be guilty of being rather slow in perception of the complex points being raised. My hon. Friend the Member—

Mr. Heath

I had only given way to an intervention, not to a speech.

Mr. Lever

I thought that the right hon. Gentleman had finished.

Mr. Heath

No, I was only extending a courtesy to the hon. Gentleman for having commented on his speech.

Mr. Lever

The right hon. Gentleman has the satisfaction of knowing that while I have cut his speech in half I have also cut my own in half.

Mr. Heath

Long ago in this Committee we gave the hon. Gentleman a special dispensation that his vote need not follow his voice.

Having illustrated the two differences which have emerged in this discussion the Committee will recognise that while I am not easily shocked, particularly after these last seven days and two nights. I have been shocked by the reply the Chief Secretary has given to the Amendment. The reasons he gave for rejecting charities are not justified in any way at all. He said that if charities were to be exempted it would give a reason for others, such as those who were not paying any taxation to claim that they ought to have a rebate. Charities have long been treated separately and the fact that they do not pay Income Tax has never been undermined by the fact that some other people do not pay Income Tax either, because they are not liable for taxation. That is the sort of parallel the Chief Secretary was trying to make with a Capital Gains Tax.

On the question of double taxation, the next Amendment demonstrates such a case on the hon. Member for Cheetham's own definition. Here capital gains are paid by normal companies in whom the investment trust invests. The investment trust itself then has to pay capital gains. This is the clearest kind of double taxation. It is to this which we object and we say that charities ought to be able to have the refund on this degree of double taxation as far as the Capital Gains Tax is concerned. We are not prepared to allow it to be confused with the much wider issues.

As the hon. Member for Cheetham recognised with the broad grin with which he spoke his last two sentences, the Chief Secretary has undermined his case by his own proposal that charities should get together and organise their own investment trust, in which case they will be exempted from Capital Gains Tax—

7.0 p.m.

Mr. Diamond

They are exempt.

Mr. Heath

Yes, under this Clause, but he has given away his whole case when, in addition to giving away the principle, he is prepared to urge that the existing arrangements for investment trusts and unit trusts should be damaged—and in some cases broken up—by the withdrawal of the charities and the superannuation and pension funds in order to create their own individual unit trusts and investments trusts.

That is what the hon. Gentleman suggested, but if they do that what does the Treasury gain from it, as against what our Amendment proposes? Nothing at all. What is the point? It is that the existing organisation of investment by charity in investment and unit trusts will be broken up. Therefore, if we adopt his proposal, the Treasury gains nothing. All that happens is that the existing and, I think, criticism-free organisation of investment and unit trusts are damaged, mutilated, mauled, changed.

On grounds of principle, we disagree with the Chief Secretary, and on grounds of practice I cannot see the slightest justification for his proposal. Can the hon. Gentleman not be big enough to say, "I have now given away the principle by my own proposal", as the hon. Member for Cheetham recognised at the end of his speech? Is it not pointless to say to charities and superannuation and pension funds, "You must withdraw from your existing investment trust and form your own, and then you will not have to pay Capital Gains Tax, if you like to go to all that trouble"? I cannot see the least justification for adopting the hon. Gentleman's principle, and in view of any lack of justification for that principle, and of the Chief Secretary's damaging suggestion, I hope that my right hon. and hon. Friends will take the matter to a Division.

Mr. Harold Lever

As I have been attacked as to my argument, I should like to make a brief reply. I would, first, tell my hon. Friend the Member for Westhoughton (Mr. J. T. Price) that I share his passionate conviction that we should do all we can to help workers' pension funds, and the like. No one wishes to detract from that. My hon. Friend must not think that, these matters being technical and being debated on a technical and supposedly transcendental level—as was suggested by the hon. Member opposite—it shows some sort of heartlessness on the part of those who try to clarify these matters—

Mr. J. T. Price

But my hon. Friend must not suppose that I am half as naïve as he thinks I am.

Mr. Lever

I have known my hon. Friend for getting on for 20 years, and I should not have supposed him to be naive at all. I merely urge him not to be misled into supposing that those of us who make out a technical case are thereby lacking in warmth of heart for those things that he so passionately and cogently supports.

The right hon. Member for Bexley (Mr. Heath) and the hon. Baronet the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) say that since a shareholder gets a certificate of rebate for Capital Gains Tax which may be of use to him one day, charities or pension funds are being badly treated if they do not immediately get the cash amount on the certificate that the private shareholder gets. That appears to me to be a somewhat odd argument. Let us, first, take it in logic, and then take it in the warmhearted, practical manner of my hon. Friend the Member for Westhoughton.

It does not seem logically convincing to say that, because someone who might be liable to be taxed again gets a certificate relieving him of that liability, it should be done in the other case. The practicality is that a shareholder who gets his certificate may find that it is not worth the paper it is printed on. That would be the case if no capital gain was realised. If the electors were foolish enough at some future point when the economy is getting to its feet—as it will under this Government, after the dreadful condition in which the party opposite handed it to us—if, following a barrage of demagogic propaganda, the electors were to return the Tories to power, we might very well get a slide in share prices, and the man would have his certificate for rebate of Capital Gains Tax which he would never be liable to pay. The certificate would not be worth a penny.

The same reason applies to the charity. The private citizen gets a rebate certificate. No one complains that he has been unjustly treated if he is never called on to pay Capital Gains Tax. So, for the same reason, no one can claim that a charity has been unjustly treated if it does not get a certificate and is not called upon to pay the tax. Therefore, I again suggest that my hon. Friend the Chief Secretary might gratify any charitable impulses that genuinely exist on the other side, as opposed to novelties that may be demagogically exploited, by giving the charities the same certificate as the private citizen—

Mr. Heath

Would the hon. Gentleman agree that the difference is that the charities are themselves exempt by the Clause from paying Capital Gains Tax even when the gain is there? What we say is that in their case the tax has been paid on their behalf through the invest- ment trust, so, as it has been paid, it should be returned to them.

Mr. Lever

That is a misconception on the right hon. Gentleman's part. He supposes that the Government, by giving this relief against double taxation, have conceded the point that a company has paid Capital Gains Tax on behalf of its shareholders but, if that were so, one would never get to the point where the trust would pay on behalf of the shareholder and the shareholder not get relief. The shareholder gets a certificate, which he can produce, against paying the tax, but that is not saying, "Because the company has paid on his behalf, we will rebate the Capital Gains Tax".

What the Government say is that it would be harsh and oppressive in such circumstances not to give some relief, but the form of relief is not repayment of the company's payment of tax, because the Government do not recognise that it has been paid in that way. The Government say, "It would be harsh and oppressive if we did not give you some relief, and the particular relief is that you will get a certificate entitling you to set off the amount that the company pays in certain circumstances." The circumstances are that the Government say, in popular language, "It would be unfair that you should pay Capital Gains Tax again." But as the charity is automatically not called on to pay Capital Gains Tax, again, there is no such anomaly that requires the remedy that the Government give to the private shareholder.

To move to the practicalities of the matter, I have already pointed out that the same principle applies to relief on Corporation Tax. No one gives a relief to a charity or pension fund on Corporation Tax paid by a company—

Mr. Grimond

I rise only to ask for information. The hon. Member refers to Corporation Tax, but I think that he is talking of Profits Tax. Does any investment trust ever pay Profits Tax as such?

Mr. Lever

Yes, depending on what income the trust received. If it received franked investment income, and only franked investment income, it would not pay any Profits Tax, but many investment trusts received income that was not franked, and did pay Profits Tax.

Mr. Grimond

They pay Profits Tax presumably because the sources from which they received dividends have not done so. In fact investment trusts did not pay Profits Tax on their own, so to speak.

Mr. Lever

The right hon. Gentleman is wrong. The investment trust was liable to pay Profits Tax just as any other company was—no more, and no less. When it invested in gilt-edged securities and got an income from them, the trust would pay Profits Tax on that income just as any other company would, and if a charity held shares in that investment trust it could not get that tax back. We had no appealing whines from the other side on behalf of charities, we were not told that we were demolishing all investment funds and restricting rights, when the other side was in power. Why did they not press these pleas when there was a Conservative Government in power, and not start making them in the middle of a financial crisis, as we now are in? It would have been one small redeeming feature in the 13 wasted years if the right hon. Gentleman could have said that he had done this.

Mr. Lubbock

What the hon. Gentleman has said in relation to investment trusts is a slight simplification. They were allowed to offset management and other administrative expenses against unfranked investment income.

Mr. Lever

They will still be able to do that. The situation has not altered.

The principle is that Profits Tax was payable by investment trusts. The charity which saw fit to invest in an investment trust instead of buying gilt-edged securities itself would have to pay the Corporation Tax indirectly. Nobody will give it any certificate or rebate. The Corporation Tax or the Capital Gains Tax must be paid by the company. No rebate is given. It must be recorded sadly that right hon. and hon. Gentlemen opposite thought that it should be. A period in opposition is a splendid thing for the Conservative Party, for it develops its sense of justice.

It has been said that the Government are brutally and unkindly showing a general indifference to the welfare of the nation in general and to pension funds and charities, in particular, by restricting the scope of their investment. Hon. Gentlemen opposite should grow up about taxation matters. They should understand that when radical taxation changes occur they will impose on the private citizen and the trustee of the charitable trust all sorts of reconsiderations of their style of investment.

This is inevitable under any scheme of taxation. Under the new Corporation Tax scheme which is about to be imposed a company which holds property will pay 40 per cent. Corporation Tax. No one has tabled an Amendment suggesting that a charity which holds that company's shares should have a rebate for the proportion of the Corporation Tax paid by the company. Yet it could be argued that if the charity directly owned the property, no Corporation Tax would be payable, no Income Tax, and no tax at all because the charity would be exempt.

The answer must be that in the changed circumstances of a modernised taxation system charities, too, cannot be exempted from the need to look about, to be advised, and to come to a conclusion—pension funds, too—about how they may invest their funds. These days many pension funds and charities hold property company shares. It will quickly become obvious to their advisers that the desirable thing to do will be to sell those shares and buy property to that extent. That will be much to their advantage.

It lies ill in the mouths of hon. Members opposite to speak about business incentives and the like in regard to charities and pension funds and not call upon them to use any initiative or take any wise advice for the purpose of guiding their investment. This is a spurious argument and without logical foundation. Right hon. and hon. Gentlemen opposite will merely cover themselves with a certain amount of disgrace if they vote for so unprincipled an Amendment.

Mr. Geoffrey Lloyd

The debate is taking a rather serious turn from the point of view of charities and investment trusts. The hon. Member for Manchester, Cheetham (Mr. Harold Lever) told us in one moment of frankness that when revolutionary changes in taxation are proposed—[Interruption.]—I think that they have been properly described as revolutionary changes. "Revolutionary" is my word, in addition to the hon. Gentleman's "radical". The hon. Gentleman said that when such changes are proposed many people, including trustees, must consider their position, and, if necessary, change their attitude to investment.

Mr. Harold Lever

I said that they must change their attitude to particular investments and select those which are most advantageous for them to hold. I made that abundantly clear.

Mr. Lloyd

That is exactly what I meant to say, and I do not think that I said anything very different.

We are pointing out that in the circumstances of this Clause charities and, particularly, pension funds—I particularly raise the question of the pension funds of the smaller companies—will have to face very considerable changes in their position. What are the changes? The Government have admitted our point that in future it will be less advantageous for a charity or pension fund, from the point of view of the tax, to invest in an investment trust than to invest directly in investment companies.

The Chief Secretary began to see that there was a seriousness in the position, and he gave what he thought was a way out, which was that the charities and pensions funds could form unit or investment trusts of their own. Does he realise what he has done by saying this on behalf of the Government? He must face the fact that as a matter of practical business, which the hon. Member for Cheetham slightly derided for a moment, pension funds and charities are very largely invested in investment trusts, and since it has been said here that it is no longer advantageous for them to invest in that manner unless the Clause is amended as we suggest, and it has been proposed by the Government that they have the alternative choice of forming unit or investment trusts of their own, we have the position that large sums of money are being invited to leave the investment trusts and to be put into totally new organisations, inexperienced in the art of investment, in order to gain protection against the mischief which will be imposed by this Clause.

This can lead to considerable disturbance of the security markets If it does, the responsibility is on the Government. I would only ask the Chief Secretary to consider the matter more closely. After all, what the Government are doing—and what they seem to think does not matter—is to disrupt a successful method of investment which is used beneficially by charities and pension funds all over the country, by means of which the money flows properly into investment trusts and is put to the best purpose. The Chief Secretary is really inviting a kind of convulsion in the security markets.

7.15 p.m.

Mr. Diamond

I hope that I may be forgiven if I say a few words in response to what the right hon. Member for Sutton Coldfield (Mr. Geoffrey Lloyd) has said. He indicated that it would be the view of the Government that they should discourage in some way investment in investment and unit trusts. This is not the case. I have not said anything of the kind that the right hon. Gentleman imputed to me. I said, and I repeat, that it is claimed, and I accept, that there are advantages for certain investors to invest in unit and investment trusts, and I listed two major advantages. One is expert management. I do not withdraw from that notwithstanding the great number of hon. Members opposite who have disclosed an interest as being investment and unit trust managers.

The second is the spread of investment. It is implicit in that that this would be of greater benefit to the small investor, the small pension fund, and the small charity than to the large one which could have its own spread of investment by virtue of its size. I have made that absolutely clear. It is, therefore, a matter for the individual to assess and to weigh up whether it is better to continue investing in these ways and to get these advantages and to suffer the disadvantage which has been suffered in the past of paying Profits Tax. They have been prepared to do that, so there must have been some advantages in it which would outweigh all the other disadvantages.

As to whether they want to carry on doing that or whether in appropriate cases it would be more worth while to do something different, I am not suggesting that anybody should do anything different at all. I merely say that I have listened to the debate very carefully, and if it emerged that there were possible ways of assisting of the kind that I have indicated I should be very glad to consider them to see whether we could facilitate those concerned by further provisions. As anyone who has gone into the question of pension funds will know, because there are those which are wholly approved and those which are, to use shorthand, mixed, there are great difficulties which could not be overcome without the assistance of the Government in legislative form. Therefore, if it were the wish of the Committee that some kind of solution should be found on those lines, I would be glad to consider the matter and, if possible, introduce on Report an appropriate Amendment to enable that to be done.

Mr. Peter Walker

What the Chief Secretary has said is that there are advantages from the point of view of the smaller charity or superannuation fund in using the investment trust medium to invest its money and that in that way it gets a spread of the risk. He stated rightly that this does not apply to the bigger superannuation fund and charity because it can invest direct for itself. What the hon. Gentleman is saying by not accepting our Amendment is that the capital gains which the bigger fund makes on each of 50 securities will not be taxed, but those who use the investment trust medium because that is where they can get the spread of 50 securities will be taxed.

Mr. Diamond

I am saying what the previous Government did—[interruption.]—and continued and what has been satisfactory to right hon. and hon. Gentlemen opposite hitherto. It was under that regime that the investment and unit trusts grew. I am only saying that, having regard to the disadvantages—we need not go into the reasons why they inevitably existed, and why the previous Government could not remove them—the investing public, including charities and pension funds, thought that there were outweighing advantages—

Mr. Peter Walker

This is not so if the Chief Secretary is taking the argument of the Profits Tax. When Profits Tax was taken in the underlying company it was not taxed again. But where Capital Gains Tax is taken in the underlying company it is taxed again.

Mr. Diamond

The hon. Gentleman is now going back one stage further. I am talking only about Profits Tax paid by the investment trust. It could have been paid 25 times, because the investment trust could have had shares in an ordinary company which paid Profits Tax on which the investment trust got no relief, and that company could have had a portfolio investment in another company which had paid Profits Tax. It could have gone on many times. This is accepted throughout our system.

I was trying to indicate the methods by which the Government would be prepared to help if that kind of help was thought to be useful. Hon. Members opposite have not attempted to deal with the difficulties in the argument which I illustrated. Let me make it quite clear, because I do not want there to be any misapprehension about it. The right hon. Gentleman's speech was based on his belief that a unit or invesment trust is virtually the agent of the individual investor. What he said was that the investment trust did it on behalf of the investor. We do not go as far as that.

Mr. Gower

In his balancing, the Chief Secretary has said that unit and investment trusts have the advantage of experienced management and spread. That has been his other factor. I would remind him that they have enjoyed those great advantages for years, but from now on there will be a new factor. As a result of his refusal to accept the Amendment they will be in a disadvantageous position vis-à-vis other kinds of investment. To that extent, his attitude tonight is prejudicing the position of these trusts and limiting the choice of those who manage great pension funds and charities. He has made no answer to this point.

Question put, That those words be there inserted:—

The Committee divided: Ayes 184, Noes 187.

Division No.153.] AYES [7.25 p.m.
Agnew, Commander Sir Peter Grant-Ferris, R. Mills, Peter (Torrington)
Alison, Michael (Barkston Ash) Grieve, Percy Miscampbell, Norman
Allan, Robert (Paddington, S.) Griffiths, Peter (Smethwick) Mitchell, David
Allason, James (Hemel Hempstead) Grimond, Rt. Hn. J. Monro, Hector
Anstruther-Gray, Rt. Hn. Sir W. Gurden, Harold Morgan, W. G.
Atkins, Humphrey Hall, John (Wycombe) Morrison, Charles (Devizes)
Baker, W. H. K. Hall-Davis, A. G. F. Mott-Radclyffe, Sir Charles
Barber, Rt. Hn. Anthony Harris, Frederic (Croydon, N.W.) Munro-Lucas-Tooth, Sir Hugh
Barlow, Sir John Harris, Reader (Heston) Noble, Rt. Hn. Michael
Batsford, Brian Harrison, Brian (Maldon) Nugent, Rt. Hn. Sir Richard
Bennett, Sir Frederic (Torquay) Harrison, Col. Sir Harwood (Eye) Osborn, John (Hallam)
Bennett, Dr. Reginald (Gos & Fhm) Harvey, Sir Arthur Vere (Macclesf'd) Osborne, Sir Cyril (Louth)
Berkeley, Humphry Harvey, John (Walthamstow, E.) Page, John (Harrow, W.)
Berry, Hn. Anthony Hastings, Stephen Page, R. Graham (Crosby)
Bessell, Peter Hawkins, Paul Pitt, Dame Edith
Biffen, John Heald, Rt. Hn. Sir Lionel Powell, Rt. Hn. J. Enoch
Birch, Rt. Hn. Nigel Heath, Rt. Hn. Edward Price, David (Eastleigh)
Black, Sir Cyril Hendry, Forbes Quennell, Miss J. M.
Box, Donald Higgins, Terence L. Ramsden, Rt. Hn. James
Boyd-Carpenter, Rt. Hn. J. Hill, J. E. B. (S. Norfolk) Rawlinson, Rt. Hn. Sir Peter
Boyle, Rt. Hn. Sir Edward Hirst, Geoffrey Redmayne, Rt. Hn. Sir Martin
Brinton, Sir Tatton Hobson, Rt. Hn. Sir John Ridsdale, Jullan
Brown, Sir Edward (Bath) Hogg, Rt. Hn. Quintin Roots, William
Bryan, Paul Hooson, H. E. Russell, Sir Ronald
Bullus, Sir Eric Hopkins, Alan Sharples, Richard
Burden, F. A. Hordern, Peter Sinclair, Sir George
Buxton, Ronald Howard, Hn. G. R. (St. Ives) Smith, Dudley (Br'ntf'd & Chiswick)
Campbell, Gordon Hunt, John (Bromley) Smyth, Rt. Hn. Brig. Sir John
Carlisle, Mark Hutchison, Michael Clark Spearman, Sir Alexander
Carr, Rt. Hn. Robert Irvine, Bryant Godman (Rye) Stainton, Keith
Cary, Sir Robert Jenkin, Patrick (Woodford) Steel, David (Roxburgh)
Chataway, Christopher Johnson Smith, G. (East Grinstead) Stodart, Anthony
Cole, Norman Johnston, Russell (Inverness) Studholme, Sir Henry
Cooke, Robert Jopling, Michael Talbot, John E.
Cooper-Key, Sir Neill Kaberry, Sir Donald Taylor, Sir Charles (Eastbourne)
Courtney, Cdr. Anthony Kimball, Marcus Taylor, Edward M. (G'gow,Cathcart)
Craddock, Sir Beresford (Spelthorne) King, Evelyn (Dorset, S.) Taylor, Frank (Moss Side)
Crosthwaite-Eyre, Col. Sir Oliver Kirk, Peter Teeling, Sir William
Cunningham, Sir Knox Lagden, Godfrey Temple, John M.
Curran, Charles Lambton, Viscount Thatcher, Mrs. Margaret
Dalkeith, Earl of Lancaster, Col. C. G. Thomas, Sir Leslie (Canterbury)
Davies, Dr. Wyndham (Perry Barr) Langford-Holt, Sir John Thomas, Rt. Hn. Peter (Conway)
d'Avigdor-Goldsmid, Sir Henry Legge-Bourke Sir Harry Thompson, Sir Richard (Croydon,S.)
Dean, Paul Lewis, Kenneth (Rutland) Tilney, John (Wavertree)
Deedes, Rt. Hn. W. F. Litchfield, Capt. John Turton, Rt. Hn. R. H.
Digby, Simon Wingfield Lloyd, Ian (P'tsm'th, Langstone) Tweedsmuir, Lady
Doughty, Charles Longbottom, Charles van Straubenzee, W. R.
Elliot, Capt. Walter (Carshalton) Longden, Gilbert Walder, David (High Peak)
Elliott, R. W.(N'c'tle-upon-Tyne,N.) Loveys, Walter H. Walker, Peter (Worcester)
Eyre, Reginald Lubbock, Eric Walker-Smith, Rt. Hn. Sir Derek
Farr, John Lucas, Sir Jocelyn Ward, Dame Irene
Fell, Anthony McAdden, Sir Stephen Weatherill, Bernard
Fletcher-Cooke, Charles (Darwen) MacArthur, Ian Whitelaw, William
Fraser, Ian (Plymouth, Sutton) Mackenzie, Alasdair (Ross&Crom'ty) Williams, Sir Rolf Dudley (Exeter)
Gammans, Lady Mackie, George V. (C'ness & S'land) Wills, Sir Gerald (Bridgwater)
Gardner, Edward McLaren, Martin Wilson, Geoffrey (Truro)
Gibson-Watt, David Maclean, Sir Fitzroy Woodhouse, Hon. Christopher
Gilmour, Ian (Norfolk, Central) Macleod, Rt. Hn. Iain Wylie, N. R.
Glover, Sir Douglas Marten, Neil
Goodhart, Philip Maude, Angus TELLERS FOR THE AYES:
Goodhew, Victor Mawby, Ray Mr. Francis Pym and
Gower, Raymond Maxwell-Hyslop, R. J. Mr. Jasper More.
Grant, Anthony Meyer, Sir Anthony
Allaun, Frank (Salford, E.) Boardman, H. Callaghan, Rt. Hn. James
Alldritt, Walter Bottomley, Rt. Hn. Arthur Carmichael, Neil
Allen, Scholefield (Crewe) Bowden, Rt. Hn. H. W. (Leics S.W.) Carter-Jones, Lewis
Armstrong, Ernest Boyden, James Castle, Rt. Hn. Barbara
Atkinson, Norman Braddock, Mrs. E. M. Coleman, Donald
Bagier, Gordon A. T. Bradley, Tom Corbet, Mrs. Freda
Barnett, Joel Bray, Dr. Jeremy Cousins, Rt. Hn. Frank
Baxter, William Brown, Hugh D. (Glasgow, Provan) Craddock, George (Bradford, S.)
Beaney, Alan Buchan, Norman (Renfrewshire, W.) Cronin, John
Benn, Rt. Hn. Anthony Wedgwood Buchanan, Richard Crossman, Rt. Hn. R. H. S.
Bishop, E. S. Butler, Herbert (Hackney, C.) Cullen, Mrs. Alice
Blackburn, F. Butler, Mrs. Joyce (Wood Green) Dalyell, Tam
Davies, G. Elfed (Rhondda, E.) Johnson, Carol (Lewisham, S.) Parkin, B. T.
Davies, S. O. (Merthyr) Johnson,James(K'ston-on-Hull,W.) Pearson, Arthur (Pontypridd)
Dempsey, James Jones, J. Idwal (Wrexham) Pentland, Norman
Diamond, John Jones, T. W. (Merioneth) Perry, Ernest G.
Dodds, Norman Kenyon, Clifford Popplewell, Ernest
Doig, Peter Kerr, Mrs. Anne (R'ter & Chatham) Prentice, R. E.
Donnelly, Desmond Kerr, Dr. David (W'worth, Central) Price, J. T. (Westhoughton)
Driberg, Tom Lawson, George Probert, Arthur
Duffy, Dr. A. E. P. Ledger, Ron Pursey, Cmdr. Harry
Dunn, James A. Lever, Harold (Cheetham) Rees, Merlyn
Dunnett, Jack Lewis, Ron (Carlisle) Rhodes, Geoffrey
English, Michael Loughlin, Charles Roberts, Goronwy (Caernarvon)
Evans, Albert (Islington, S.W.) Mabon, Dr. J. Dickson Rogers, George (Kensington, N.)
Fernyhough, E. McCann, J. Rose, Paul B.
Fitch, Alan (Wigan) MacColl, James Sheldon, Robert
Fletcher, Sir Eric (Islington, E.) MacDermot, Niall Shore, Peter (Stepney)
Fletcher, Ted (Darlington) McGuire, Michael Short,Rt.Hn.E.(N'c'tle-on-Tyne,C)
Fletcher, Raymond (Ilkeston) Mclnnes, James Silkin, John (Deptford)
Floud, Bernard Mackenzie, Gregor (Rutherglen) Skeffington, Arthur
Foot, Sir Dingle (Ipswich) Mackie, John (Enfield, E.) Slater, Mrs. Harriet (Stoke, N.)
Foot, Michael (Ebbw Vale) McLeavy, Frank Slater, Joseph (Sedgefield)
Ford, Ben MacMillan, Malcolm Small, William
Fraser, Rt. Hn. Tom (Hamilton) MacPherson, Malcolm Solomons, Henry
Freeson, Reginald Mahon, Peter (Preston, S.) Stewart, Rt. Hn. Michael
Ginsburg, David Mahon, Simon (Bootle) Stones, William
Greenwood, Rt. Hn. Anthony Mallalieu,J.P. W.(Huddersfield,E.) Summerskill, Hn. Dr. Shirley
Gregory, Arnold Mapp, Charles Swain, Thomas
Grey, Charles Mason, Roy Symonds, J. B.
Griffiths, Rt. Hn. James (Lianelly) Mellish, Robert Taylor, Bernard (Mansfield)
Gunter, Rt. Hn. R. J. Millan, Bruce Thomas, Iorwerth (Rhondda, W.)
Hamilton, James (Bothwell) Miller, Dr. M. S. Tinn, James
Hamilton, William (West Fife) Milne, Edward (Blyth) Tomney, Frank
Harper, Joseph Morris, Alfred (Wythenshawe) Urwin, T. W.
Harrison, Walter (Wakefield) Morris, Charles (Openshaw) Walden, Brian (All Saints)
Hazell, Bert Mulley,Rt.Hn.Frederick(SheffieldPk) Wallace, George
Henderson, Rt. Hn. Arthur Murray, Albert Watkins, Tudor
Hobden, Dennis (Brighton, K'town) Neal, Harold Wells, William (Walsall, N.)
Holman, Percy Newens, Stan Wilkins, W. A.
Horner, John Noel-Baker, Francis (Swindon) Willey, Rt. Hn. Frederick
Howarth, Robert L. (Bolton, E.) Noel-Baker,Rt.Hn.Philip(Derby,S.) Williams, Alan (Swansea, W.)
Howie, W. Oakes, Gordon Williams, Mrs. Shirley (Hitchin)
Hughes, Cledwyn (Anglesey) Ogden, Eric Willis, George (Edinburgh, E.)
Hughes, Emrys (S. Ayrshire) O'Malley, Brian Wilson, William (Coventry, S.)
Hughes, Hector (Aberdeen, N.) Oram, Albert E. (E. Ham, S.) Winterbottom, R. E.
Hunter, Adam (Dunfermline) Orme, Stanley Woodburn, Rt. Hn. A.
Hunter, A. E. (Feltham) Oswald, Thomas Woof, Robert
Hynd, H. (Accrington) Page, Derek (King's Lynn) Zilliacus, K.
Irving, Sydney (Dartford) Paget, R. T.
Jackson, Colin Pannell, Rt. Hn. Charles TELLERS FOR THE NOES:
Jay, Rt. Hn. Douglas Pargiter, G. A. Mr. Ifor Davies and
Jeger,Mrs.Lena(H'b'n&St.P'cras,S.) Park, Trevor (Derbyshire, S.E.) Mr. Harry Gourlay.
Jenkins, Hugh (Putney) Parker, John

Amendment made: In page 39, line 10, at end insert: (2) If property held on charitable trusts ceases to be subject to charitable trusts—

  1. (a) the trustees shall be treated as if they had disposed of, and immediately reacquired, the property for a consideration equal to its market value, any gain on the disposal being treated as not accruing to a charity, and
  2. (b) if and so far as any of that property represents, directly or indirectly, the consideration for the disposal of assets by the trustees, any gain accruing on that disposal shall be treated as not having accrued to a charity,
and, notwithstanding the provisions of this Act the limiting time for making assessments, an assessment to capital gains tax chargeable by virtue of paragraph (b) above may be made at any time not more than three years after the end of the year of assessment in which the property ceases to be subject to charitable tn.ists.—[Sir Eric Fletcher.]

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