'GROUP 14—LEARNED SOCIETIES (Hansard, 12 July 1972)

§ Mr. Sheldon
The main purpose of this group of Amendments concerns clubs and societies. There has been considerable anxiety about the position of clubs in relation to value added tax because the activities of clubs cover so wide a range. There are many clubs akin to certain societies. There are within this wide range clubs which one would wish to encourage, and there are others towards which one would wish to be neutral.
The difficulty with the value added tax is that, whereas the Government praise its comprehensiveness, it does not seem able to discriminate where certain discriminations might prove necessary. As a result, all clubs will find themselves liable to the tax. We wish to consider the matter further. However, at this 1758 stage in our proceedings, and in view of the lateness of the House, I shall direct attention, in particular, to the position of the learned societies.
I have seen a list of about 600 of these societies and institutions, ranging from the Institute of Chartered Accountants, which may not have all our sympathy, to the Royal Zoological Society of Scotland, which will certainly have our sympathy, and especially that of my hon. Friend the Member for West Lothian (Mr. Dalyell). I mention those two merely because they were the first and the last in the list which I happened to turn up.
The list includes some of the most venerable and some of the most important of our national institutions, of which we are rightly proud. What is more, they reflect a great many of the strengths of our society. It has been said that three people in Britain constitute a committee. What we often forget is the valuable work which is undertaken by many of these societies in which there is no reward for any of the people con-concerned save the pleasure of giving of their time and their service in advancing their own vocation or branch of learning.
A few names from the roll-call make the point clear: the Royal Institute of British Architects, the Institution of Civil Engineers, the Institution of Mechanical Engineers, the Chemical Society, the Royal Institute of Chemistry, even the Cyclists Touring Club, even the Fabian Society, and possibly the Bow Group, too, though I am not sure that its finances would bring it within this category, since it probably has a turnover of rather less than £5,000. I do not know. Next, the Institute of Health Education, the Institute of Industrial Safety Officers, the Town and Country Planning Association, the Institute of Works Managers.
Those are just a few of the important bodies which contribute enormously to the understanding of industrial processes and branches of academic learning which have so much to contribute to our community.
One feature common to all these societies is that the spread of knowledge is one of the primary purposes of their work. The richness of our society is one of our great strengths. It is not always easy to help this kind of institution. They have an independence which 1759 it is right they should have. They certainly do not need particular kinds of subsidies which might be difficult to devise. But on the other hand they certainly should not be taxed. I should have thought that the Chief Secretary would want to go to great lengths to ensure that they will not suffer from this burden.
In Clause 42 we know that the trade unions are specifically excluded. In the Committee debate we were told that Contributions to political parties are regarded as being outside the scope of the tax…on the ground that they are akin to donations."—[Official Report, Standing Committee E, 14th June, 1972; c. 971.] I do not know whether contributions to learned societies are regarded in the same way. If they are I do not know why the Minister who wound up that debate did not accept the Amendment: but I do not wish to argue that point at length.
If it is possible to have in the Bill the specific exclusion of trade unions, it is surely possible to have a similar exclusion for the learned societies. If that is not considered possible at this late stage, will the Chief Secretary agree to regard subscriptions to learned societies in the same way as subscriptions to political parties, as "akin to donations"? However much of a grammatical nonsense that may be, I am prepared to accept an explanation like that. What is important is the need for clarification here and the need for every kind of assistance to be given to these important bodies.

§ Mr. Dalyell
Does my hon. Friend know the risk he is taking by raising the subject of the Royal Zoological Society of Scotland? It might provoke me into certain dissertations on orangutangs. Mr. Speaker has kindly given his orangutang to Edinburgh Zoo and that makes two there. They are well satisfied with life at the moment.
However, I have more germane subjects to raise. There are many societies which are marginal in this respect and it seems that £5,000 is the critical figure. I have a letter written by Mr. E. J. Hoskin, of H.M. Customs and Excise, King's Beam House, London, E.C.3, to the Parliamentary and Scientific Committee. He says: So far as subscriptions are concerned, it is my view that the Committee would be 1760 deemed to be carrying on a business for the purposes of VAT by reason of clause 45 of the Finance Bill, and accordingly membership subscriptions would in principle be chargeable with tax. However, the Chancellor has proposed a general exemption from the tax for those with a turnover in taxable goods and services not exceeding £5,000 a year and, from the accounts which you were good enough to supply it seems that The Parliamentary and Scientific Committee will enjoy the benefit of this exemption. The only point I make is that there is a balance here. It might be that the Parliamentary and Scientific Committee accounts are just under this magical figure of £5,000. There will be those which are just above it which will be substantially hit and those below which will get away. Is there not a case for some kind of tapering?

§ Mr. Patrick Jenkin
I will respond to the Amendment in the same spirit as that in which the hon. Member for Ashton-under-Lyne (Mr. Sheldon) moved it, dealing briefly with the general case about clubs, next saying something about learned societies, and then coming to the point that the hon. Member for West Lothian (Mr. Dalyell) has made.
The argument about clubs generally, and particularly some clubs in the North of England and some of the clubs not far from here, is that they represent substantial elements of personal consumption. It was the view of my right hon. Friend the Chancellor that in a general comprehensive tax on consumption there was no reason for them to escape. As we have said repeatedly, we do not try to draw distinctions between one form of spending and another, except the broad categories for zero-rating and so on, least of all to draw distinctions of the sort the hon. Gentleman was urging upon us, which would lead us to say that some clubs were more worthy of support than others and that we should try to discriminate. It would be impossibly difficult for any Government.
Our general view is that subscriptions to clubs represent a form of consideration for the supply of services which are represented by the facilities the club makes available to iths members. This is always subject to the £5,000-a-year limit. The facilities which the club provides, such as the meals in its dining room, or, in the case of some societies, literature or other 1761 goods or services, will be within the charge to tax in any event under the normal rules of the VAT that we have already discussed. What come in under the Clause are the subscriptions. I should make it clear that it is to the aggregate of the subscriptions and the other trading turnover that the £5,000 limit applies.
Learned societies are in a different case under the Bill for sporting and social, recreational clubs. They come under subsection (l)(c). They have an option under subsection (2) to remain an exempt body if they wish. The reason is perfectly clear. They will have a certain amount of hidden tax, and if they are exempt there is no way in which that tax may be rolled forward into the accounts of its members, who may themselves be taxable traders. One example is a professional society which in the course of its operation incurs hidden tax, and all of whose members are registered traders. For example, the great majority of members of the Institute of Chartered Accountants may be registered as individuals, as partners in a firm. The members of the society might well decide to take advantage of the election to opt in, so that the subscriptions were then chargeable to VAT and would be treated as an input tax in the accounts of their profession. But there may be societies the great bulk of whose members are not taxable traders. In those circumstances they would prefer to opt for exemption, because there would be no point in charging the tax, as it could not be treated as an input tax in their members' own activities.
That is the difference. In the ordinary club, the social, sporting club, the subscriptions will be chargeable, together with the turnover, if the total is more than £5,000. The learned societies have an option. In either case the member is getting special facilities in return for his subscription. This is a form of consumption and, subject to the points I have made, it is right that clubs should be within the charge of VAT.
I understand the point made by the hon. Member for West Lothian. The £5,000 limit in a sense is arbitrary. We felt that the figure was at about the right level to distinguish between the small trader, the small club, the small professional man and somebody in a larger way 1762 of business who should come within the charge to the tax, but it is, of course, a single cut-off point. It would be exceedingly difficult and add greatly to the complexity of the tax if we were to introduce any form of taper. It would be difficult to apply it to a single body like the Parliamentary and Scientific Committee, of which many of us are members, and not to others. There comes a point when a society or club becomes big enough for it to be right to apply the tax. A learned society would be within paragraph (c) and so have the right of election. I imagine that virtually none of the members of the Parliamentary and Scientific Committees are taxable traders and they therefore would not be able to set off the tax. It would be inconceivable in those circumstances for that Committee ever to opt to be within the tax so as to charge VAT on its subscription.

§ Mr. Dalyell
In candour I have to take the point about the administrative difficulty of tapering. Is £5,000 the right figure? Would it not be more sensible, given present-day costs, to have £10,000 or £15,000?

§ Mr. Jenkin
As my right hon. Friend said in his Budget statement, £5,000 is substantially higher than the exemption limit that has been fixed in any of the Common Market countries, where the highest figure—and I speak from memory—is equivalent to about £1,300, roughly one-third of our level. We have pitched it a good deal higher and have taken out a wider spectrum of small business men, small professional men and small clubs. Generally, this has been welcomed. I entirely accept that it is an arbitrary figure and one which as the years go by any Government will want to keep under review.

§ Mr. Sheldon
With the leave of the House. The Chief Secretary has not met my point. I understand fully that where most members of a learned society are traders it can help if VAT is charged and the input is allowed by the member firms of the society. The list I gave included a large majority of societies consisting of individual members, and it is they I am particularly interested in. What for example, does a member of the Institution of Civil Engineers get in the way 1763 of benefit from being a member? The amount of encouragement to those people will be small, whereas the amount of discouragement may be large. I was hoping that the Chief Secretary would be able to give assistance to this category.

§ Mr. Jenkin
At this late hour I cannot add much to what I have said. I should have thought that the Institution of Civil Engineers is a body from which members derive considerable advantage. I do not know if the hon. Gentleman has ever been into its premises in Great George Street. There is a substantial library and I have no doubt the Institution provides all sorts of technical services for its members. The Institution clearly comes under paragraph (c) is being an organisation of persons carrying on a profession, and so it has the power to elect whether it should be within or outside the tax.