Clause 9.—(PURCHASE TAX VEHICLES ACQUIRED FOR EXPORT.) (Hansard, 6 June 1967)

§ Mr. Terence L. Higgins (Worthing)
I beg to move Amendment No. 64, in page 13, line 41, to leave out from ' on'to the end of line 44 and to insert:the passing of this Act'.
As I understand it, the purpose of the Clause is this: at present anyone who purchases a motor car in the United Kingdom which he then proposes to export is exempted from Purchase Tax when he initially takes delivery of the vehicle. Then, if he exports it within the time specified, he can do so without paying Purchase Tax. This is an advantageous system in encouraging the export of motor vehicles. If it were not so anyone effectively exporting a motor vehicle which he had used for a short time in this country would bear the full burden of United Kingdom Purchase Tax, and this would put us at a grave disadvantage compared with the export of motor cars from other countries. I understand that other countries make somewhat similar arrangements.
If the vehicle is retained in this country without paying Purchase Tax beyond a specified date it is taking advantage of this otherwise convenient arrangement, and we would agree that it is right that some restriction should be imposed on those who leave a vehicle in this country later than the date specified. We have no objection to mat aspect of the Clause, which is its main purpose.
What puzzles us is that the Clause does not come into operation until such day as the Commissioners may by Order determine. This will involve a Statutory Instrument subject to annulment in pursuance of a Resolution of this House. We are not clear why, instead of bringing the Clause into effect immediately, the date when it comes into operation should be determined by the Commissioners, and why it should lead to further debate in the House.
839 If there is a case for the Clause—and we believe there is—it should come into operation without delay. A seasonal point is involved here. The normal period is six months between the date when the vehicle is delivered and the date when it has to be exported. If the Clause came into operation immediately it would cover vehicles which will have to be exported by some time in September. This is the peak period for visitors to this country who are likely to be purchasing vehicles and taking them home. There again, there would seem to be some case for the Clause coming into operation immediately rather than after a period of delay.
I hope that in view of these considerations the Financial Secretary will see fit to accept the Amendment, or at any rate to tell the House why there should be this delay, and why we should follow a form of procedure which will clearly take up the time of the House of Commons.

§ Mr. MacDermot
The reason why we did not provide that the Clause should come into effect, in the ordinary way, on the passing of the Measure was that we expected that manufacturers might not wish to change the system in mid-season, and might want some time for printing new forms of instruction to the dealers concerned. These expectations were confirmed after the publication of the Bill, when we had consultations with the manufacturers. They agreed that the normal date of the passing of the Bill would have been inconvenient for them. Equally, they are not yet in a position to be able to say precisely on what date it would be convenient to move over to the new system. They will naturally want to do it as soon as possible, but they cannot give us a firm date.
This flexibility would therefore be in the trade's interests. The indications are that the date will be some time in the autumn, at the end of the summer season. This was originally for the trade's convenience, and its representatives have confirmed that this flexibility would assist them. We could fix the date now, but, if it will not be convenient to anyone, it seems unnecessarily arbitrary.

§ Sir Gerald Nabarro (Worcestershire, South)
I must quarrel with the Financial Secretary. People who buy motor cars here free of Purchase Tax to take home 840 as British exports do so during the peak period of tourism, between June and September. The forms which the hon. and learned Gentleman mentioned are a relatively easy administrative change. As the Bill will probably reach the Statute Book, as is usual for Finance Bills, in the second half of July, surely in the seven weeks between now, 6th June, and then there is ample time to reprint a few forms to enable manufacturers and salesmen to take the fullest possible advantage of the spate of tourists in August, September and early October.
More visitors to Britain, notably from North America, are expected this year than ever before. This sale of motor cars free of Purchase Tax is very important for our exports. Between now and Report the Financial Secretary should reconsider this. I am closely in touch with the trade and have heard no suggestion by manufacturers or by retailers and distributors that they could not cope with this relatively minor change in six or eight weeks.

§ Mr. MacDermot
The hon. Gentleman says that he is in touch with the trade. Has he received any representations that they would like an earlier, and if so what, firm date in the Bill? If he has that information, I would gladly consider it between now and Report.

§ Sir G. Nabarro
I have no such firm information, because I have no reason to believe that the Treasury would not concede this relatively minor, non-party political point if these views were put fairly and squarely. Six weeks is ample time to make a change of this kind. I do not know whether the hon. and learned Gentleman heard the Answers given to Question No. 1 today and my supplementary question, but I said that the trade say that they are facing the worst slump since 1929.
I should have thought, therefore, that the Treasury should put pressure on the trade to make this minor change while the Bill is going through this House and another place. By the time it reaches the Statute Book the new system should be ready, that is, in the third week of July. If that results in more sales, this House would have made a tiny contribution to the promotion of exports.

§ Mr. Higgins
There is some attraction in the Financial Secretary's argument, but 841 so that we can consider it between now and Report, would he clarify one point? He mentioned a form which would have to be altered, but the Clause imposes penalties on those who do not abide by the terms imposed by the Commissioners and I am not sure how it would need to be altered.

§ Mr. MacDermot
Under the existing law, the liability if a vehicle were not exported in the required time would be the manufacturer's. To protect himself, he secures written undertakings from the purchaser, which is unpopular with the purchaser, and this unpopularity led to this change in the law. What would be required now, presumably, is some document explaining these provisions to the purchaser, because the liability will now be his or that of any subsequent owner if the car is not exported in the required time.
The manufacturer will have to ensure, first, that the dealers understand the change and can explain it to the purchasers, as there would otherwise be a different dissatisfaction. The period which the manufacturers require to get out these instructions and be satisfied that the dealers understand the new system is the reason for the delay.
I share the reaction of the hon. Member for Worcestershire, South (Sir G. Nabarro) that it is surprising that they should need this time, and I will certainly have inquiries made again with the Society of Motor Manufacturers to see whether they could not introduce it as soon as the Bill is passed. It would be in their interests. If that is so, I will bring forward the necessary Amendments on Report. We have discussed this with the Society, which, with the greatest interest of all in the change being effected as soon as possible, welcomes the Bill's flexibility.

§ Mr. Higgins
In the light of the hon. and learned Gentleman's remarks, I beg to ask leave to withdraw the Amendment.

§ Mr. Higgins
I am a little puzzled by a phrase in subsection (2), which says: Where a vehicle in respect of which tax has been remitted under the said section 23(1) 842 has been exported but is subsequently brought back into the United Kingdom, then, without prejudice to subsection (1) of this section, the vehicle shall not when so brought back be treated for the purposes of section 11 of the said Act of 1963 as imported into the United Kingdom. Surely it would therefore be possible for someone who had paid Purchase Tax to export a vehicle and then bring it back without being subject to Section 11 of the 1963 Act, which imposes tax. How can it be done without prejudice to subsection (1)? I may have misunderstood, but I should be grateful for clarification.

§ Mr. MacDermot
The point is complicated. The hon. Gentleman nearly got there but missed one point. This subsection closes a potential loophole, the possibility that someone could buy a car, export it by the given date without paying Purchase Tax and re-import it shortly after for permanent retention here without paying the full tax.
The possible loophole, without subsection (2), is that, on bringing it back, he would be liable to Purchase Tax only on the second-hand value under Section 11. The subsection makes it clear that, if an untaxed "Section 23" car is brought back in these circumstances, it will be deemed not to have been imported for tax charge purposes. He then remains with his original liability to pay the new value of the car.

§ Dr. Reginald Bennett (Gosport and Fareham)
This matter is of particular interest to places like the Channel Islands. Are we to understand that on trans-shipment from the Channel Islands to this country a car on which the full Purchase Tax was not charged initially will now be liable to the full charge and not to a proportionate amount of its second-hand value, even if it comes from the Channel Islands?

§ Mr. MacDermot
I do not think there is any difference between a car coming from the Channel Islands or from any other place outside the scope of Purchase Tax for this purpose. To follow the hon. Gentleman's example, if somebody had a Section 23 car and went on a short visit to the Channel Islands and returned to this country before exporting the car, I do not think that he would incur the Purchase Tax liability in those circumstances. However, somebody resident in 843 this country who buys a car cannot avoid his proper liability to Purchase Tax by paying a visit to the Channel Islands.

§ Dr. Bennett
I raise this point because there is a large business in self-drive hire cars in the Channel Islands. After a year or so, this type of car then being secondhand the vehicles are brought back to this country. I understand that a proportion of the Purchase Tax will have to be paid on the then value of those vehicles. This new provision may put a heavy burden on the owners of such vehicles and have a severe effect on this traffic.

§ Mr. MacDermot
In such a case, I do not believe that there would be any difficulty because the vehicles would have been away for longer than the period with which we are concerned. They would be genuine second-hand cars when brought back to this country. However, to clear up the point I will look into the matter.

§ Mr. John Smith
This provision shifts the burden from the manufacturer to the owner. While this is unexceptionable in respect of the first owner, I am wondering how the second and subsequent owners will be protected. The provision states that the tax will be payable … by any other person in whose possession the vehicle is found in the United Kingdom … and goes on to deal with forfeiture. Cars on which Purchase Tax has not been paid and which are not exported represent such a small proportion of the total number of vehicles that I suggest that no purchaser of a secondhand car will bother to inquire about this and may find himself in possession of a vehicle on which he must either pay the tax due or forfeit the car. The Clause goes on to say … unless, or except to the extent that, the Commissioners see fit to waive payment of the whole or part thereof … In what circumstances would the Commissioners waive payment?

§ Mr. MacDermot
It is essential that we retain this protection or there could be widespread evasion. There would be a large loophole in the administration of the Purchase Tax on motor cars without this provision.
I imagine that the kind of case which the hon. Gentleman has in mind would be the sort of circumstance which the 844 Board would take into account in deciding whether or not to waive payment. If somebody had been the innocent victim of a fraud—had made proper inquiries but, by skilful means, it had been concealed from him that this was a Section 23 car—then that might be considered by the Board, in the exercise of its discretion, to be a proper case in which to waive the tax. However, we must preserve for the Board its powers to follow through the liability of the purchaser of a Section 23 car.