§ Relief for interest
§ I come now to the question of tax relief for interest.
§ During the Report stage of last year's Finance Bill, after referring to our election pledge, I explained at some length both the approach of the Government and the problems consequent on the Report of the Crow her Committee last year. The reference is the Official Report of 6th July, 1971, columns 1200–1203. I pointed out that the Government's commitment was part of a programme for a Parliament. I also made it clear that the burden on the Administration must be a major factor and that reallowance without restriction would require 1,000 extra trained staff. Nevertheless I intend to make a start this year.
§ For the reasons I explained last year there cannot be relief for ordinary hire-purchase transactions. That, of course has always been the position. There has never been relief in respect of ordinary hire-purchase transactions. For administrative reasons at present, and to maintain equity as between different forms of credit, the first £35 of all interest paid will not qualify for tax relief except in the case of loans for house purchase. Secondly, action will be taken to frustrate the artificial transaction of borrowing to buy dated securities with the certainty of a capital gain on realisation on or shortly before redemption. Subject to these two restrictions, relief for interest will be restored as from 6th April. The cost is estimated at £3 million in 1972–73 and £7 million in a full year.
§ Sale and leaseback, and deferred premiums
§ As was foreshadowed in announcements made last August, the Finance Bill will also contain provisions concerning the treatment of short leaseback arrangements, and of certain forms of tax avoidance involving the use of premiums for leases and other capital payments made by instalments.
§ Charities
§ In our manifesto we stated that we would encourage the flow of private funds to charities, and over the past year I have been considering how best to do this. 1371 Charities already benefit greatly from the covenant system, and I do not propose to change that. It has repeatedly been put to me that there should be some relief from estate duty on bequests to charities and I agree. Unfortunately, because of the opportunities for manipulation by a few if very large sums were to be exempted, there must be a limit. Subject to that, it is right to act.
§ I have, therefore, decided that after today any property going to charities will be exempt from estate duty up to a maximum of £50,000. There are certain bodies concerned with the preservation of the national heritage where I am satisfied that there need be no limit. So property going to these bodies will in future be exempt from estate duty without limit. These include the National Trust, the National Gallery, and the British Museum.
§ There is one further and important way in which I propose to help charities. This proposal also is the outcome of representations and discussions over the past year. After today all gifts made to charities or to those other bodies I have just referred to will be exempt altogether from capital gains tax. In the case of this proposal the exemption will be without limit.
§ I have no doubt, from what I have been told, that these two proposals will be of very considerable benefit to the charitable and other organisations concerned. The estimated cost is £7 million in 1972–73 and £15 million in a full year.