HC Deb 27 October 1966 vol 734 cc1509-16

General provisions as to winding up

17.—(1) Where a company is a person prospectively liable for levy in respect of a chargeable act or event, and the company is wound up, whether compulsorily or otherwise, any sum recoverable by the Commission in respect of the levy shall constitute a debt provable in the winding up, if apart from this paragraph it would not constitute a debt so provable.

(2) If the date which is the relevant date for the purposes of section 319 of the Companies Act 1948 (preferential payments) is after, but not more than twelve months after, the date which is the relevant date for the purpose of assessing the levy, any sum so recoverable shall be deemed to be included among the debts of the company specified in subsection (1) of that section.

(3) If the date first mentioned in sub-paragraph (2) of this paragraph is not after the relevant date, then for the purpose of recovering any sum recoverable by the Commission in respect of the levy the Commission shall, in priority to all other debts provable in the winding up, have a first charge on so much of the net capital proceeds (if any) of the chargeable act or event in question as is received by the company, by an official receiver or by a liquidator as money divisible among the unsecured creditors of the company.

Provisions where property vested in liquidator

18.—(1) The provisions of this paragraph shall have effect where, in pursuance of an order made under section 244 of the Companies Act 1948 (vesting of property of company in liquidator), all or any part of the property of a company has vested in the liquidator of the company, and the liquidator is a person prospectively liable for levy in respect of a chargeable act or event—

  1. (a) by reason of anything done by him in his capacity as liquidator of the company, or
  2. (b) by reason of any right accruing to him in that capacity, or
  3. (c) in Case C, by reason of an interest in land, or the benefit of a contract, which has become vested in him in that capacity.

(2) If in the circumstances specified in the preceding sub-paragraph a notice of assessment of levy served in respect of the levy has resulted in an operative assessment of levy,—

  1. (a) any sum recoverable by the Commission in respect of the levy shall constitute a debt provable in the winding up of the company, if apart from this paragraph it would not constitute a debt so provable, and
  2. (b) any such sum shall not be recoverable from the liquidator otherwise than as being such a debt due to the Commission from the company.

(3) For the purpose of recovering any such sum the Commission shall, in priority to all other debts provable in the winding up, have a first charge on so much of the net capital proceeds (if any) of the chargeable act or event in question as is received by the liquidator as money divisible among the un secured creditors of the company.

Property of company subject to debentures secured by floating charge

19. Where a company registered in England is a person prospectively liable for levy in respect of a chargeable act or event, and a receiver is appointed on behalf of the holders of any debentures of the company secured by a floating charge, or possession is taken by or on behalf of those debenture holders of any property comprised in or subject to the charge, then if—

  1. (a) the date of the appointment of the receiver, or of possession being so taken, is after, but not more than twelve months after, the date which is the relevant date for the purpose of assessing the levy, and
    2. 1511
  2. (b) at the first-mentioned date the company is not in course of being wound up.
section 94 of the Companies Act 1948 (payment of certain debts out of assets subject to floating charge in priority to claims under the charge) shall have effect in relation to any sum recoverable by the Commission in respect of the levy as if that sum were included among the debts specified in section 319(1) of that Act.

Interpretation

20. In this Part of this Schedule 'company' and 'debenture' have the same meanings as in the Companies Act 1948.—[Mr. Willey.]

Brought up, and read the First time.

Mr. Willey

I beg to move, That the Schedule be read a Second time.

This new Schedule, combined with its associated Amendments, groups together in one convenient place the provisions relating to death and insolvency and deletes the existing provisions from the various parts of the Bill where they appear. This will make the provisions much easier for practitioners. The new Schedule also adds certain provisions relating to the liability of personal representatives, trustees in bankruptcy and liquidators for payment of levy.

It is necessary to add these provisions both for clarity and to protect the representatives or trustees from personal liability, as well as to protect, in some cases, creditors who might otherwise have suffered from the Commission's prior claims. The combined effect of all these Amendments is to reduce the Commission's priority and not, as the hon. Member for Crosby (Mr. Graham Page) has said, to increase it.

Part I of the new Schedule is general and applies both to death and to insolvency. It takes up various definitions and defines the sum which, in the case of insolvency, the trustee in bankruptcy, official receiver or liquidator will have in his hands from the disposal of an asset and on which the Commission has first claim for levy.

Part II deals with death. Broadly speaking, it makes it clear that acts done by, or in relation to, the deceased continue to be valid and that the personal representatives step into the shoes of the deceased. It limits, however, the liability of the personal representatives for payment of levy to the assets of the estate of which they are the representatives and protects them from a further personal liability. It ensures that a notice of assessment must be served within three years of death so that the estate can be wound up reasonably quickly. It also makes provision for intestacy.

Part III deals with bankruptcy. Again, the objects of this Part of the Schedule are to ensure that the trustee in bankruptcy steps into the shoes of the bankrupt and that the trustee is protected from personal liability. There is an important further point, however, which applies both here and in Part IV, which deals with the winding up of companies. Without the provisions of the Schedule, it might be held that payment of levy on the disposal of an asset by a trustee or a liquidator was an expense incurred in the administration of the bankruptcy or winding up.

If this were the case, the Commission would be entitled to collect levy in priority to any other unsecured creditors to the whole of the value of the bankrupt's estate or the assets of the company. Where the asset disposed of had been mortgaged up to the hilt, this might prove very unfair on small creditors in the bankruptcy or winding up.

The provisions of Parts III and IV ensure, therefore, that the Commission's priority is limited to the proceeds which the trustee in bankruptcy, official receiver or liquidator receives from the disposal of the asset. If the net capital proceeds are insufficient to meet the levy payable, the Commission will share pari passu with the creditors in the remaining assets. This is a substantial protection for the citizen.

Part IV applies the same principles to winding up that Part III does to bankruptcies.

12.15 a.m.

Mr. Graham Page

We are obliged to the Minister for his rather rapid explanation. He was getting me out of breath when he read his brief at that speed. I wish that he would remember that what he says has not only to get out of his head, but into our heads on this side of the House.

There are one or two points about the Schedule which seem to give the Commission unnecessary preference, particularly over the ordinary creditors. I understand that the Commission would have no security over a property which may be subject to the levy or to the proceeds from that property, or can the trustee in bankruptcy, the administrator of an insolvent estate or the liquidator of a company follow the proceeds and have some security over them?

There may be two different circumstances here. Suppose, for example, that a bankrupt had started a project of material development on a property and had been assessed to levy on that development. It relates to a specific property which still remains in the bankrupt's hands when he goes bankrupt. Has the Commission any right against that property itself, or does it come in with the general creditors?

We know that the Commission has preference over the ordinary creditors and is a preferential creditor. To that extent, it may be that, by taking the levy, the Commission can deprive the ordinary creditors of any share in the estate. Is it also a secured creditor over any part of the estate?

I thought that I detected a tone of some pride in the right hon. Gentleman's voice when he said that the Commission would be obliged to serve a notice of assessment within three years. But the levy is collectable almost immediately it is assessed. Again taking the bankrupt as an example, his estate would have to pay the Commission the levy in priority to other preferential creditors without any period of time. The trustee or the administrator of the estate may be forced by the Commission to wait three years before he can clear up the estate. The trustee or administrator cannot force the Commission to settle the matter at an earlier stage.

May I refer to Paragraph 9, subparagraph (4), which relates to the administration of the estate of a deceased person? The normal practice of an administrator or executor wishing to clear up an estate is to advertise for any outstanding creditors. If he does that in the form required by Section 27 of the Trustee Act, 1925, and allows the time to pass for claims to be made, he gets a clearance and is not responsible for any claim which may come in after that. Why should these be wiped out so far as the Commission is concerned? Why should the Commission be in this favoured position when, if a trustee has done his advertising under the Trustee Act, 1925, he is still not protected against any claim from the Commission? That is quite an unnecessary preference for the Commission.

The following Clause, No. 10, shows the trouble one can get into with any levy of this sort. When the person concerned dies intestate, his property vests, until letters of administration are granted, in the President of the Probate, Divorce and Admiralty Division, and there had to be a special provision in the Schedule to ensure that the President of the Probate, Divorce and Admiralty Division was not assessed to levy. It shows the stupidity of this sort of Schedule.

The Minister referred to the Clauses giving the Commission preference over ordinary creditors. I see no reason why the Commission should have that preference. It is a commercial concern trading in land, and it should take its place with other commercial undertakings and not be in the same position as the Crown collecting taxes. Again and again the Minister has told us that this is not a tax. It is a tax for some purposes, when it suits the Minister's, and not for others, and it should no t have the tax preferences in this Schedule.

Mr. Clegg

I shall not detain the House for long, but my eyes were irresistibly drawn to paragraph 19, which says: Where a company registered in England is a person prospectively liable for levy… Does this mean it refers only to companies such as Ken Dodd Limited, or is it a term of art which embraces all companies which are prospectively liable for levy?

This Schedule, as all the Schedules in the Bill, is complex and it will take a lot of understanding. I wonder what sort of intelligence test the Minister is applying to those civil servants who will have to understand and administer it, and what sort of training schedule he has in hand for the Commission to use in training its staff to understand it. Added to that, will they be provided with full reports of the Committee and Report stages of the Bill, so that they will have the Minister's commentaries on what he thinks the Bill means?

Mr. Robert Cooke

My hon. Friend the Member for Crosby (Mr. Graham Page), if I understood him aright, was claiming that the Commission had special privileges. If it missed the notice in the newspapers it could still claim against the estate. He has a very valid complaint. I put it to the Minister that the Inland Revenue seem able to cope and notice things in the newspapers. It is well known that the tax collectors read the gossip columns and "Londoner's Diary" to see who is marrying who and who is selling what at Christie's. They send people there and and to every conceivable organisation dressed as ordinary citizens. They get up to all sorts of tricks. They even——

Mr. Graham Page

I hope that my hon. Friend is not suggesting that the Commission add to its staff of 2,000 a few Blakes.

Mr. Cooke

If the Amendment in the name of my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) is accepted there will be a limit on the number.

The point is, the Inland Revenue officials manage to do a substantial amount of sleuthing and reading of the newspapers. They even sent someone to pay half a crown to see my stately home. He got the impression that I was making money out of the operation. How wrong he was.

Mr. Onslow

I understood the right hon. Gentleman to be congratulating himself on his prudence and foresight in collecting into this one Schedule a number of provisions and stipulations in the Bill which it is clearly sensible to see collected in one Schedule. Before he pats himself too heavily on the back, may I ask him to explain why it is only at this late stage in our consideration of the Bill that this blindingly obvious need has dawned on him?

Mr. Willey

The hon. Gentleman was a member of the Standing Committee. This did not occur to him then. If it is so blindingly obvious, it should have been blindingly obvious to him then, and had it been so he was under a duty to call our attention to it. From a practitioner's point of view it is better to collect them together in the Schedule. I was not patting myself on the back. I was stating something which was equally obvious.

Mr. Onslow

rose—

Mr. Willey

I shall not give way. This is the Report stage.

Mr. Robert Cooke

Surely the right hon. Gentleman is not seeking to hide behind a procedural device to prevent my hon. Friend the Member for Woking (Mr. Onslow) from getting a straight answer to his question?

Mr. Willey

The hon. Member for Woking (Mr. Onslow) knows that he was being frivolous and was not adding anything to our discussion.

Mr. Onslow

Having accused me of being frivolous, will the right hon. Gentleman now give way?

Mr. Willey

The accusation was not necessary. It was so obvious.

The matters to which the hon. Gentleman called attention are in the Bill. They are not amended by the Schedule. The hon. Gentleman called attention to paragraph 9(4). This relates to things done by the personal representative and not to things which occurred before death, and it would be wrong, if a charitable act or event occurred during the administration of the estate and the personal representative had no personal liability, for the Commission to be able to protect itself.

Question put and agreed to.

Schedule read a Second time, and added to the Bill.

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