TAX EXEMPTIONS FOR SELF-BUILD SOCIETIES (Hansard, 25 June 1974)

§ The Under-Secretary of State for the Environment (Mr. Gerald Kaufman)
I beg to move, That the clause be read a Second time.
May I express my sympathy with all hon. Gentlemen in the predicament in which we find ourselves, including expressing my sympathy to myself, since we on the Government Front Bench are 1218 faced with the same difficulty as that which faces everyone else. If hon. Gentlemen feel that they are ill-prepared, perhaps they will accept that we are all in the same boat.
In moving new Clause 10 I would advise the House that this clause, by inserting a new Clause 341A into the Income and Corporation Taxes Act 1970, provides for self-build societies approved by the Secretary of State to obtain exemption from corporation tax on income from completed houses occupied by members and from tax on chargeable gains on transfer of the houses to members.
Self-build societies are housing associations set up by groups of people building their own houses. By their acting cooperatively, the work is facilitated. They gain some benefits which would not be available to them as individuals. Some operations requiring special skills not available within the group may be contracted out. A society almost invariably disbands when the houses are completed and occupied by the members.
Societies do not receive any of the subsidies available to housing associations providing accommodation for letting, nor have these societies been eligible for the benefits of the option mortgage subsidy such as co-ownership societies may receive if approved under Section 341 of the Income and Corporation Taxes Act 1970. Nor have self-build societies been eligible for tax relief on their mortgage loans on the cost of land and of building materials until the society dissolves and each member qualifies in his own right as an individual owner-occupier.
This has long been a subject of complaint. It was referred to in the evidence of the Cohen Report in 1970. This new clause is the first step towards putting self-builders on a better footing comparable with co-owners. It provides for the approval by the Secretary of State of self-build societies which comply with certain conditions to be established in regulations to be made.
Approved self-build societies will by the clause be exempt from corporation tax on income from members for land belonging to the company. Mostly this income will be from completed houses 1219 occupied pending completion of the rest. The clause will also exempt approved societies from tax on chargeable gains arising on disposal of the houses to members.
Since the land is in effect owned by the same people before and after the transfer, corporately before and individually after, the point of transfer is an appropriate point at which to assess and to tax capital gains. It is intended to amend the Bill in another sense to provide that self-build societies approved under the clause shall be eligible to benefit from the option mortgage subsidy, putting them on the same footing as co-ownership societies.
I hope that with that brief explanation, the House will accept this ameliorative new clause.

§ Mr. Rossi
We welcome from this side of the House any help which can be given to self-build societies and any initiative in voluntary housing which the Government can give by way of subsidy or in this case by way of tax relief.
In his explanation the Minister drew an analogy with co-ownership. During the Committee stage there was a discussion concerning the difficulties in which co-ownership schemes are at the moment. I have not had an opportunity, for reasons we also discussed a few moments ago, to go through the Order Paper to see whether the Minister has dealt with co-ownership societies in a way in which we were hoping in Committee he would. Perhaps he could indicate before we leave this new clause whether he will be dealing with it in another place.

§ Mr. Kaufman
I should declare an interest. Since the Committee stage I have become a member of a co-ownership organisation. [HON. MEMBERS: "Hear, hear."] I am glad that that meets with the approval of hon. Gentlemen. I like to please people. Therefore I have a special interest in this, though I would not dream of allowing my special interest to influence what goes on inside the Department. The answer to the hon. Gentleman is that we have not produced anything yet. We are still engaged in discussions.

§ Mr. Michael Latham (Melton)
May I ask one question of the Minister before he winds up this brief debate.
What is the present extent of the activities of self-build societies? How many have appeared? How many more does he expect to appear within the next year or so?

§ Mr. Kaufman
If the hon. Gentleman would care to put that question on the Order Paper we shall try to obtain the information. We had not previously thought it necessary to obtain that information.