Schedule 14.—(CHARGEABLE GAINS: LAND IN GREAT BRITAIN.) (Hansard, 12 June 1967)

Mr. MacDenmot
I beg to move Amendment No. 101, in page 89, line 2, to leave out paragraph 14 and to insert: 14. Section 42(3) of the Finance Act 1966 (relief by reference to estate duty in respect of a gift inter vivos) shall not apply to a gift inter vivos consisting of land unless the current use value of the land at the time of the death exceeds the sums within paragraphs (a) and (b) of paragraph 4(1) of Schedule 6 to the Finance Act 1965 which, if the donee had disposed of the asset at the time of the death, would have been allowable in computing the gain accruing on that disposal and, if the said section 42(3) does so apply, that excess shall be the excess referred to in the expression 'the said excess' in the provisions of the said section 42(3) which determine the proportion of estate duty by reference to which relief is to be given. The purpose of the Amendment is to correct a drafting error in paragraph 14. The purpose of Section 42(3) which the paragraph seeks to amend is to allow the donee to include the Estate Duty referable to the excess in the cost allow- 230 able to him for Capital Gains Tax purposes when he comes to dispose of the assets.
As originally drafted the provision in the paragraph did not attain its object, and the purpose of the Amendment is to achieve the correct result by providing in effect that Section 42(3) of the 1966 Act is not to apply at all unless there has been an increase in the current use value of the land that was the subject of the gift inter vivos between the date of the gift and the date of the donor's death, and, secondly, where there has been such an increase, its amount is to be the figure taken into account as the excess in determining the allowable proportion of the duty in accordance with the fraction laid down in Section 42(3), namely, the proportion of the duty which the excess bears to the principal value.

§ Mr. Graham Page
This seems a bit stingy. However the Financial Secretary argues this, it is cutting down the allowance of Estate Duty as against betterment levy. It is cutting it down to that part of Estate Duty which is payable in respect of the increase in the current use value between the date of the gift and the date of the death. Why should not the whole of the Estate Duty be allowed against eventual payment of betterment levy?
The eventual vendor is being charged betterment levy or Capital Gains Tax on the whole of his gain—betterment levy on part of it, and Capital Gains Tax on another part of it—and he should not be retaxed on any sum which he has paid in Estate Duty. It should not be a pruning-down of the sum because it refers to a little bit outside the difference between current use value at the date of the gift and the date of death. It should be an allowance for the whole of the Estate Duty which he has paid in respect of that gift.

§ Mr. MacDermot
In future, when capital gains on disposals of land containing development value become chargeable under the provisions of this Schedule by reference to changes in the current use value, the amount of Estate Duty allowable under Section 42(3) obviously should be cut down to the part of the Estate Duty paid which is referable to the increase in current use value between the date of the gift and the date of the 231 death. This seems the right purpose to achieve. It was not achieved in the original drafting, but is now by the Amendment.

§ Mr. Temple
It would be appropriate for me to rise to pay a real tribute to my hon. Friend the Member for Crosby (Mr. Graham Page) for the detailed examination which he has been able to give both to this Schedule and to Clause 31. The Committee should remember that the blame for all these complications lies fairly and squarely with the Government. The Financial Secretary said that these complications were inevitable. Of course they were, as soon as the Government decided that betterment levy was not to be treated as tax and as soon as the Government decided to have a Land Commission levy as well as a Capital Gains Tax these complications were inevitable.
We have made it quite clear that we do not believe in the Land Commission or the betterment levy; we believe that a Capital Gains Tax could take the place of both, with none of the complications of Clause 31 or Schedule 14. The whole thing could be taken care of by way of the Capital Gains Tax. The Government are entirely responsible for the complications and have further responsibility for placing formidable burden on all those who seek to 232 develop land, because they will not know where they are.
I have been extremely interested in the last two debates on this matter but they have been almost incomprehensible to those of us who have been trying to follow them. I thank the Financial Secretary for his offer to give technical assistance to those who are trying to follow these matters, but I hope that, in advance of further debates, if the hon. and learned Gentleman is to put questions of this complication before us he will circulate those who may be interested in the explanation of these technical matters.

§ Mr. MacDermot
After two-and-a-half years in this office I am fully aware that the Government can never win. If we introduce a simple, clear measure which is readily understood—such as Selective Employment Tax—we are told that we have produced a half-baked, ill-thoughtout, ill-digested, rough and brutal measure. If, having listened to those complaints, we go home and work out something with infinite refinement and care, which meets every point with justice, we are told that what we have done is to confuse utterly the taxpayer with something which is hoplessly complicated and impossible to understand.
The only thing I can agree with the hon. Member for the City of Chester (Mr. Temple) about is that the hon. Member for Crosby (Mr. Graham Page) is deserving of tribute.