HC Deb 22 June 1966 vol 730 cc723-5

Question proposed, That the Clause stand part of the Bill.

Sir Keith Joseph (Leeds, North-East)

The Clause gives very proper encouragement to statutory redundancy payments, but, as the Government will be well aware, some redundancy payments are not of a statutory nature. Will the Government give the same tax exemption, by way of encouragement, to redundancy payments which do not at the moment get it?

When the service of an individual who is made redundant is split between the company which makes him redundant and a company which has been acquired by that company, then the element of the redundancy payment attributable to the earlier service is frequently not allowed for tax. This is just one example. We should like to know whether, as an extension of this very proper attitude to statutory redundancy payments, the Government will take another look at nonstatutory redundancy payments to see whether the Inland Revenue can encourage them by an equivalent tax exemption.

Mr. Hirst

I wish to raise a point which I think is slightly different. I feel that there should be a full tax allowance in all redundancy payments, and my point arises where a business for one reason or another has ceased. I am not quite sure whether my right hon. Friend was covering that point or not—apparently not. Then this is an additional point of some importance.

Where a business has been declining, the profits of the last period, if any, may be insufficient to allow for the full relief for redundancy payment. I hope that the right hon. Gentleman will be able to comment upon this point in addition to that raised by my right hon. Friend.

Mr. Diamond

The right hon. Gentleman asked me whether any extension was proposed in relation to tax relief for voluntary payments by an employer on cessation. Voluntary payments of this kind on a cessation are not payments in carrying on the trade, and therefore they would not attract Income Tax relief.

Sir K. Joseph

The right hon. Gentleman may be meeting a point which I should have made, but I was talking about straightforward redundancy and not cessation.

Mr. Diamond

I think that I was answering the question which the right hon. Gentleman asked me. Where there is a statutory scheme there is no question. Relief is given to the employer—the right hon. Gentleman is not asking me about the employee's tax liability.

Where there are voluntary payments arising on a cessation, not otherwise, of a business, they are not payments in carrying on the trade. Where voluntary payments are made of a kind which are approved, and the business is carrying on, that is perfectly all right. Where it is purely voluntary and there is a cessation, it is not a payment of a kind which would attract——

Mr. Hirst

In the case which I instanced, which was rather different to that of my right hon. Friend, where there is a statutory redundancy payment and a business ceases that would be dealt with. Am I clear?

Mr. Diamond

I did not hear what the hon. Member said.

Mr. Hirst

Where there is a statutory redundancy payment and the business ceases, that would be taken care of, would it not?

Mr. Diamond

Yes. There is no problem about a statutory scheme.

Sir K. Joseph

The right hon. Gentleman is being very clear and rather tautological. The question is whether Inland Revenue approval can be given more generously where voluntary redundancy payments in excess of statutory redundancy compensation is paid, without cessation? Without an amendment to discuss it is obviously difficult for the right hon. Gentleman to answer the point, but I should be grateful if he can tell us whether, with a view to encouraging redundancy payments of a more generous nature, he would undertake to ask the Inland Revenue authorities to look kindly on their approval arrangements. That is all I am asking at this stage.

Mr. Diamond

The right hon. Gentleman will appreciate that the Government are anxious to help redundancy schemes. My right hon. Friend has honoured his undertaking to do this where reasonably necessary. The right hon. Gentleman has raised a new point, which requires careful consideration, and we shall give it that consideration.

Question put and agreed to.

Clause ordered to stand part of the Bill.