Clause 35 (Hansard, 4 July 1968)

§ The Minister of State, Ministry of Housing and Local Government (Mr. Niall MacDermot)
I beg to move Amendment 73, in page 30, line 24, leave out subsection (3) and insert: (3) The regulations shall, as respects every mining lease, confer a right of election as respects the application to the mining lease of all provisions made in accordance with subsection (2) above so that—

(a) in the case of a mining lease granted on or after 6th April, 1968, an election may be made in accordance with the regulations excluding the application of those provisions;

(b) in the case of a mining lease granted before that date, no such provisions shall apply unless an election is made in accordance with the regulations.

Would it be convenient, Mr. Speaker, to discuss at the same time Amendment 74, which is consequential?

§ Mr. Speaker
If the House has no objections.

§ Mr. MacDermot
I am obliged.
I should perhaps begin by apologising for inflicting myself on the House again in a discussion on the Finance Bill. I am sure that the House had looked forward with the same relief that I had to the prospect of my not taking part in these debates again.
The first of these Amendments, No. 73, is the substantive one and is designed to meet the point of an Opposition Amendment in the names of the hon. Member for Yeovil (Mr. Peyton), the right hon. Member for Taunton (Mr. du Cann) and others in Committee, which was not reached. It substitutes a new subsection (3) for the present one in Clause 35. The effect of the alteration, if the House should approve it, is to give a right of election in all cases, that is to say, election whether to be assessed on the existing basis or on the new one.
1780 Mineral leases are at present dealt with, for levy purposes, substantially the same as other leases. Therefore, subject to certain deductions in respect of base value, levy is, broadly speaking, assessed on the capital value of the lease at the time that it was granted, the capital value, that is, of the right to receive the rent or royalties. Because of the nature of mining leases and the royalties, it is seldom possible to quantify accurately in advance that value, and it has to be estimated. This has led to considerable complaints and to very few, if any, mining leases being granted. That was the reason for the provisions of Clause 35.
The serious objections from the landowner's point of view were, first, that he was charged by reference to an estimate of future royalties, second, that that estimate might be found to be materially excessive, and, third, that there was no provision for adjusting the levy by reference to the actual royalty income.
Second, the levy is assessed as a capital sum and ordinarily becomes payable shortly after the granting of the lease, whereas royalties may not begin to come in until some years later. Again, owing to the nature of mining leases, it is not possible for the grantor to meet this by taking a premium at the outset of the lease. There was a further difficulty where the grantor was a Surtax payer in that, whereas for levy purposes his liability to Income Tax would indirectly be taken into account, his liability to Surtax would not.
For those reasons, we introduced the Clause providing the new basis of assessment under which the levy would be chargeable from time to time on the royalties received or receivable under the lease. We thought it right to provide for an election in the case of leases which were granted before April this year so as to avoid any element of retrospective legislation. We gave people the choice, if they wanted it, to remain on the existing basis rather than be assessed on the new basis.
We did not provide any right of election in respect of leases granted after April this year for the simple reason that we thought, for the reasons which I have given, that it would always be to the benefit and advantage of the levy payer to be assessed on the new basis. But it 1781 has been represented to us that there may be occasions when, in the case of future leases, people would prefer to be assessed and to pay their levy on the capital basis at the outset. We see no objection if that is the way they prefer to have it. The Amendment will accordingly give the right of election always in those cases.
Under this Amendment, unlike the Opposition's Amendment, we propose that the matter should be dealt with by regulations, but we make it mandatory by the Amendment that the regulations shall provide for a right of election. Perhaps I ought to give the House an indication of what we have in mind by way of provisions in the regulations.
The election would have to be irrevocable and would have to be made at the time of, or shortly after, the assessment of levy was sent to the person liable, which would normally be in the period of two months allowed for objecting to an assessment and serving a counter-notice. The assessment would in either case contain enough information to enable the levy payer to decide which was the more favourable basis for him. We should achieve that by seeing that it contained information about the amount which the Commission considered to be the capital value of the lease, the amount which appeared to the Commission to be the base value realised by the disposition, the amount appearing to the Commission to be the amount of any expenditure on improvements and ancillary rights allowed for in calculating the amount of the levy, and, finally, the amount appearing to the Commission to be the levy which would be charged on the net development value realised by the disposition if levy were to be charged on it at the prescribed rate.
One would then go on to state the percentage appearing to the Commission to be the effective rate in respect of the disposition, with a statement that the levy would be charged on royalties at the effective rate unless the levy payer within the two months to which I have referred exercised his election to pay it as a lump sum, that is to say, the principal amount of the levy. That notice would be subject to a counter-notice by the levy payer.