HC Deb 10 July 1973 vol 859 cc1413-9

'Section 33 of the Finance Act 1965 shall be amended in subsection (10) by leaving out (d) and insert— (d) in relation to such activities of a body of persons whose activities are wholly or mainly carried on otherwise than for profit"'.—[Mr. Joel Barnett.]

Brought up, and read the First time.

10.45 p.m.

Mr. Joel Barnett

I beg to move, That the clause be read a Second time.

Mr. Speaker

I understand that with this clause it will be convenient to take new Clause 12—Replacement of assets—trade unions.

Mr. Barnett

These clauses give the Treasury Bench an opportunity to show its generosity, because they are essentially reasonable clauses.

It will be known that the clauses deal with roll-over relief. At the moment, without going into too much detail, a company or firm can sell a building or fixed asset, make a capital gain, buy another building to replace it, and set off the capital gain against the new building that it buys. That broadly is the situation, although there are many other smaller matters related to it.

That situation does not apply to nonprofit-making bodies—for example, amateur clubs. There are many amateur clubs in my constituency, as there are no doubt in other constituencies. I have taken up this matter with the Treasury and, absolutely correctly, it cannot do anything about the situation as the law stands. But it is an odd situation, as I will illustrate by referring to a case to which I had my attention drawn concerning an amateur rugby club whose premises were subject to a compulsory purchase order. The club made a capital gain on the price paid under the compulsory purchase order. The premises which the club had to buy to replace those coming down cost more than it received, yet the club had to pay capital gains tax on the compulsory purchase order price. I cannot believe that any hon. Member regards that as fair. That is one aspect to which I hope the Treasury will extend the rollover relief.

The other example is that of trade unions. In many respects, trade unions are similar to the Pharmaceutical Society. Last year, in my view quite rightly, the Chancellor accepted a new clause to enable the society to get roll-over relief for a building on which it had made a capital gain. All I am saying is that an almost identical situation applies to a trade union. Two trade unions have had discussions with the Inland Revenue about this, and their case is almost identical to that of the rugby club to which I referred.

Mr. William Clark (Surrey, East)

Is the hon. Gentleman referring to all trade unions, or only to those that are registered?

Mr. Barnett

I am talking about an organisation of workers that was known as a registered trade union before the introduction of the Industrial Relations Act. It seems unfair that an organisation of workers that is not registered for the purposes of the Act should be penalised by not being able to obtain this rollover relief.

These are simple clauses. They would allow trade unions, if they sold premises, or were compelled to sell them because of compulsory purchase, and made a capital gain but replaced them with an asset of the same price or more, to obtain the kind of roll-over relief that is allowed to profit-making companies. The clauses would also apply to amateur clubs which find themselves in the kind of situation that I described.

This is not a party political matter. Clubs and non-profit-making bodies are being penalised by the tax system as it stands, and I hope that the House will agree to the new clauses.

Mr. Nicholas Winterton (Macclesfield)

When I entered the Chamber I had no intention of speaking to these new clauses, but having decided to do so I would direct the thoughts of my hon. Friend the Minister of State to the point made by the hon. Member for Heywood and Royton (Mr. Joel Barnett) about clubs and non-profit-making bodies which, for one reason or another, are forced out of their premises and need to purchase alternative premises. These clubs and bodies, because they sell their premises part of which are required for a road building scheme, for example, are charged capital gains tax on that sale, and that prejudices their chances of purchasing adequate alternative premises.

The situation is unjust. Recently, I referred to my hon. Friend the case of the Macclesfield Sports and Rugby Club. I regret to say that I was so incensed by his reply that I wrote to him an absolute shorter. Nevertheless, I know that my hon. Friend will reply in a polite way. I believe that his officials in drafting such insensitive replies to fair and reasonable requests can only expect that sort of reaction from a Member of Parliament who is closely in touch with his constituents and the needs of his constituency.

Too many areas are without adequate sporting facilities. In refusing to accept this sort of proposal, the Treasury is making no contribution to the community. I hope that my hon. Friend will show a little more sensitivity in replying to this debate than his officials showed in replying to my letter.

Is it right that money should be paid to the Treasury when people are desperately seeking sporting facilities? The Government are perhaps taking it in in order to pay it out, but is this not a very expensive way to do it? Why could not the roll-over provision apply to these bodies? Then justice will be seen to be done.

Mr. Nott

Both the hon. Member for Heywood and Royton (Mr. Joel Barnett) and my hon. Friend the Member for Macclesfield (Mr. Winterton) have particular constituency cases in mind, about which they have written to me. I greatly regret that on both occasions I have had to give a Treasury "No". I will certainly look at the manner in which I replied to my hon. Friend. I agree that there are good ways of saying, "No", and less good ways. I must look to my second reply with more care.

The hon. Member for Heywood and Royton has argued for some time that trade unions and sports clubs are special cases, and should benefit from roll-over relief in the same way as trading and commercial organisations. But the general principle which underlies capital gains tax is that the accrued gain is charged whenever the ownership of an asset changes. When a person disposes of an asset, the presumption is that tax should be paid on that occasion. This applies whether the person concerned is an investor selling his shares, an industrialist selling his factory or a trade union or sports club selling its premises. It is only exceptionally that the code allows for the deferment of tax liability on the disposal of chargeable assets.

Where roll-over relief is available, it is designed to meet special circumstances, since they over-rule the basic principle that tax is payable when an asset changes hands. Looking back at the 1965 Finance Act, which, after all, was introduced by the Labour Party, one sees that the intention was that the roll-over relief would ensure that the capital gains tax did not impede or discourage the necessary modernisation and re-equipment of British industry.

In the debate on the 1965 Bill, the right hon. Member for Cardiff, South-East (Mr. Callaghan), outlining the terms of rollover relief, said: I believe that by this means I shall secure that the tax will not impede desirable industrial and commercial development and the transfer of business out of congested areas."—[OFFICIAL REPORT, 6th May, 1965; Vol. 710, c. 246.] Several other quotations from those debates developed that theme.

The extension in 1972 of roll-over relief to trade and professional associations was intended to be only a modest extension to include bodies representing those people who are already qualified. It simply made a small adjustment on the edge of the trading world. It cannot be taken as a precedent for extending the relief any further and certainly not as a precedent for extending it to other bodies, no matter how deserving the particular case may seem.

Generally speaking, the sale of a sports club or premises of the kind mentioned will of course give rise to considerable capital gains. I appreciate the case of the Oldham Rugby Football Club and the case of the Macclesfield Sports and Rugby Club. These are special cases.

With my hon. Friends I looked at this position with great care. As the hon. Member for Heywood and Royton said, this is not essentially a party matter but a question of where the line should be reasonably drawn.

11.0 p.m.

There are objections of principle to extending roll-over relief to trades unions and sports clubs. But I am aware of the points that have been made. We shall keep the legislation under review. We shall certainly keep under review decisions taken in 1971–72 to confine the extension to what we did last year in the 1972 Act.

In any case, there are drafting difficulties on both new clauses, in that neither of them identifies the assets which should qualify for relief. For that reason, if no other, I ask the House to reject the new clauses.

I have, however, some sympathy for the points made by my hon. Friend the Member for Macclesfield and the hon. Member for Heywood and Royton. I am not able to say more than that we shall keep under review the place where the line is now drawn. I hope that we can give it very much fuller consideration before next year's Budget. That is as much as I can say on this occasion.

Mr. Joel Barnett

With the leave of the House, Mr. Speaker, I should like to reply.

I am extremely disappointed, as would be anyone who had listened to the debate, that the hon. Gentleman talked about drafting difficulties when we are seeking to amend Section 33 of the Finance Act 1965 which refers to the assets in question. The hon. Gentleman could have drafted this properly had he wished. That answer was not good enough.

I am surprised that the hon. Gentleman talked about the 1965 Act as though it were sent down from on high and must be right. If that is what he feels I shall remember that in future debates. The hon. Gentleman said that the code allows so-and-so. But the code is not incapable of amendment. No number of codes, even those introduced by the present Government, are incapable of amendment. The hon. Gentleman should not say, "The code says this, and therefore that is an argument." It is not.

By accepting the new clauses, in the words of my right hon. Friend the Member for Cardiff, South-East (Mr. Callaghan), one would not be impeding equally desirable ends in the case of sporting clubs which wish to move, for example, from one area to another, which would be helpful to the particular district. Very often they have to move through no fault of their own. In those circumstances it is most unfair to deny them the benefit of this relief.

Finally, the Chancellor breached his own code last year—the hon. Gentleman did not reply to this matter—when he allowed this relief for trade and professional organisations, thus allowing it for non-profit-making organisations. The whole of the hon. Gentlemans' rebuttal of the new clauses is totally unsatisfactory.

Mr. William Clark

I welcome the fact that my hon. Friend the Minister is to keep this matter under constant review. There are, however, two types of sale. Where a club, or whatever it may be, is compulsorily acquired there is justification for giving roll-over relief. There is a difference concerning taxation in that if a sports club, or whatever it is, sells an asset, that is a different kettle of fish in regard to capital gains tax. But where the premises of a sports club, a trade union or any organisation are compulsorily acquired and the organisation must move, it should have very sympathetic consideration.

Question put and negatived.

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