§ 1.5 a.m.
§ Mr. Ian Gow (Eastbourne)
I apologise to the Minister for my failure to be here on a previous occasion for this debate.
The subject that I wish to raise tonight relates to the refund by the Ministry of Defence of VAT and car tax on cars exported from the United Kingdom, as that affects members of the Armed Forces serving in Ulster. The regulations imposed by Her Majesty's Customs and Excise under the responsibility of the Treasury and in accordance with the powers conferred upon the Commissioners by the Finance Act 1972 are as follows: in the case in which a soldier serving or about to serve in Germany, in the British Army of the Rhine, buys a car in the United Kingdom, takes it with him to Germany and remains outside the United Kingdom for a minimum period of 12 months, that car is exempt from VAT at the rate of 8 per cent. or car tax at the rate of 10 per cent.
I wish to consider carefully the wording of Her Majesty's Customs and Excise Notice No. 705 which in paragraph 1(a) reads as follows:Anyone who intends to live outside the United Kingdom for at least 12 consecutive months may apply for permission to acquire a new motor vehicle from a United Kingdom motor manufacturer (not a dealer) or from the sole selling agent in the United Kingdom of a foreign motor manufacturer, and use it in the United Kingdom without payment of VAT, or of car tax. … (The possibility of an occasional brief visit to the United Kingdom during the 12 months may be ignored.).Paragraph 10(a) of the same document—and this is of crucial importance—reads as follows:A vehicle may be imported tax-free when the importer comes to live in the United Kingdom for not less than 12 months, on condition that:—I turn from the general to the specific. There are at present approximately 14,800 members of the Armed Forces serving in Ulster. Of that total, approximately 8,000 are serving on a four-months' emergency tour, unaccompanied by wives and 1358 children. Of the approximately 8,000 members of the Armed Forces on emergency tour, rather less than one half but still a substantial number, amounting to nearly 3,800, have come direct from the British Army of the Rhine. In almost every case soldiers serving on an emergency four-months' tour leave their motor cars in Germany and are thus, during that period, deprived of the use of their cars.
- (i) he has both owned and used the vehicle outside the United Kingdom for at least 12 months (365 days); and
- (ii) he will retain it for his own personal use or that of his dependants for at least 2 years."
If a soldier who has served on a four-months' tour of Ulster should bring the car that he bought in the United Kingdom back to this country within 16 months of the date of the purchase he will have to pay VAT and car tax. The soldier who has not done a tour in Ulster but has enjoyed the comparatively easier task of serving throughout his time in Germany, however, has to keep his car outside the United Kingdom for only 12 months in order to qualify for exemption from VAT and car tax.
This anomaly was first raised in the House by the present Secretary of State for Wales who, on 25th January 1973, put this question to my hon. Friend the Member for Blackpool, South (Mr. Blaker), who was then the Under-Secretary of State for Defence for the Army:Does the Minister recall that 17 men of the Welsh Guards returned to this country from Germany on 8th December"—that was 8th December 1972and were obliged to pay duty on the motor cars they had purchased in Germany? Is it not a great scandal that they and 23,000 other solidiers"—Perhaps I should explain that at that time the number of British soldiers serving in Ulster was about at its peak—are at risk since they have the expectation that if they serve in Germany for more than 12 months they will be able to import goods tax-free? Does the hon. Gentleman agree with the letter from my constituent which says that this is tantamount to soldiers having to pay for the privilege of serving in Northern Ireland?My hon. Friend the then Under-Secretary of State for Defence for the Army replied:I am glad to be able to tell him that it has been agreed in principle that in exceptional cases involving tours of duty in Northern Ireland a Serviceman may be reimbursed in circumstances such as these. The detailed instructions are in course of preparation."—[Official Report, 25th January 1973; Vol 849, c. 623.]1359 I remind the House that that question and answer took place on 25th January 1973. Five weeks later, on 2nd March 1973, detailed instructions were issued by the Ministry of Defence setting out the circumstances in which the Ministry of Defence would reimburse both VAT and car tax for soldiers serving with the British Army of the Rhine who had been sent on emergency tour in Northern Ireland.
I quote from the Ministry's instruction dated 2nd March, of which the Minister was kind enough to send me a copy. The regulation said:Reimbursement is tied to service in BAOR which has been interrupted by emergency service in Northern Ireland and will apply only to those who failed to qualify for relief in consequence of such service.The regulation, as subsequently amended, went on to say thatreimbursement will be limited with effect from 1st March 1974 to those who took delivery and used their motor vehicles in BAOR on a date 16 months or more before the end of their planned tours.I believe that two points arise. First, there is the question of the interpretation of VAT Notice No. 705 dated August 1972, from which I have already quoted, which says:A vehicle may be imported tax-free when the importer comes to live in the United Kingdom for not less than 12 months, on condition that he has both owned and used the vehicle outside the United Kingdom for at least 12 months.Applying just that definition, it seems to me that in a case where a soldier goes to Germany and is then sent on emergency tour to Ulster, leaving his car in Germany, where it is used by his wife or, at any rate, used entirely in Germany, the fact that the soldier has spent four months on emergency tour in Ulster ought not to ban him, even by the definition given in the document issued by Her Majesty's Customs and Excise Notice No. 705.
However, even supposing that my interpretation of the document is wrong, we then come to the conditions set out in the instructions dated 2nd March 1973 by the Ministry of Defence, as subsequently amended. Assuming that the Ministry of Defence believes that no penalty should attach to those soldiers sent from BAOR on emergency tour in Ulster, why is it 1360 that the period for the car being outside the United Kingdom has to be extended from 12 months to 16 months in the case of soldiers who were sent to Ulster?
I have been in correspondence with the Minister, with the Secretary of State and with the Treasury about this matter. In effect, the insistence by the Ministry of Defence that it will refund VAT and car tax in the case of soldiers who have been on emergency tour in Ulster only where the car has been outside the United Kingdom for 16 months amounts to a penalty and an injustice for soldiers who are serving the Crown and their country in circumstances of great hardship and difficulty in Ulster.
Perhaps I may highlight the anomaly in this way: it seems to be most unfair that a soldier who has been serving all the time in Germany and who has had the use of his car throughout that time should be put in a better position than a soldier who has spent four months in Ulster deprived of the use of his car because he has had to leave it behind. Unless that soldier and his car remain outside the United Kingdom for 16 months, he is placed at a disadvantage as compared with the soldier who has served all the time in Germany.
The House would not want to miss any opportunity of paying tribute to our soldiers in Northern Ireland, particularly those who are there on emergency tour without their families, and those who are sent from Germany, their wives and families remaining in a foreign country, away from home. It would be an act of generosity and of justice if the Ministry of Defence were to amend these regulations.
§ 1.19 a.m.
§ The Under-Secretary of State for Defence for the Army (Mr. Robert C. Brown)
I am grateful to the hon. Member for Eastbourne (Mr. Gow) for raising this matter—although I should be less than frank if I did not say that I would have been more grateful if this had been a 10 o'clock Adjournment debate. I know from the hon. Gentleman's letters and questions that he is very interested in this matter. I welcome the opportunity to clarify the position and, indeed, to give some publicity to the concession that was introduced, as the hon. Gentleman said, in 1973.
1361 Perhaps I may begin by explaining what the problem is. It is naturally very attractive to members of the Services, when they go overseas, to buy a motor car free of car tax and VAT. It is equally natural for them to want to retain this benefit when they bring the car back with them after they complete their tour of duty overseas. Understandably, they like to bring home as new a vehicle as the rules will allow. This, in turn, leads them to put off taking delivery as late as possible.
The rules, which are applied by Her Majesty's Customs and Excise and not by the Ministry of Defence, are common to civilians and Service men alike. The rules are that unless the car has been in the possession of the owner and used by him or her overseas for a period of not less than 12 months, car tax and VAT are payable when the car is brought back to this country. In other words, the right to buy a car free of VAT and car tax is a special benefit, and in order to qualify for it certain rules must be fulfilled—rules, which are not really so very demanding.
Most members of the Services are very good at arranging their affairs so that they satisfy the requirement, and for those who think that their calculation may be upset by some unforeseen contingency, such as a premature posting, there are very good insurance arrangements obtainable through the NAAFI and elsewhere. There has been no occasion, even if such a measure could be justified on wider grounds, for making special provision for the majority of members of the forces serving abroad.
There are exceptions to every rule, however, and the emergency in Northern Ireland proved to be one of them. It was found at the end of 1972 that people who had bought cars in the reasonable expectation of not less than 12 months' residual service in Germany were having their assumptions disturbed by an unexpected emergency tour—usually of four months—in Northern Ireland. The upshot was that even though they had done their best to meet the condition by taking delivery of their car not less than a year before the completion of their normal tour, they had to pay up. To assist these people, who were unable to foresee the problem that would arise, a special concession was introduced in 1973 by any predecessor, the 1362 hon. Member for Blackpool, South (Mr. Blaker)
The original concession had no strings attached. If failure to complete the 12 months was a direct result of an emergency tour in Ulster, the individual was reimbursed what he had had to pay to Customs. However, as the hon. Gentleman has pointed out, the very full instruction sent out in March 1973 embodied a modification to be introduced one year later, in March 1974. This limited the reimbursement to those who took delivery of their motor vehicle 16 months or more before the end of their planned tours. The hon. Gentleman has argued very eloquently that this modification is unfair.
I can see that to a person like the hon. Gentleman's constituent, if it is necessary to pay £14920 to bring one's car into the country, the system can seem a little unfair. It may seem more unfair if a person has had a car for more than a years and falls short of the 16-months' rule by only about a month.
However, there is another point of view. As far as Her Majesty's Customs and Excise are concerned, the rule that a car, or anything else, must have been owned and used for a year to qualify for relief is absolute. Although this is not a point for me to discuss in detail, I am sure the hon. Gentleman will agree that it is also necessary to prevent abuse of the system. What we have done by agreeing to reimburse individuals in certain circumstances is to eliminate the risk that, for a particular kind of reason over which they have no control, they will fail to qualify. From the outset, the provision was deliberately and necessarily confined to emergency tours in Northern Ireland. By introduction of the 16– months' rule we have not gone back in principle on what was agreed originally. We have merely asked those who think they could be affected to buy their cars a little earlier—four months earlier, in fact, the length of a normal emergency tour in Northern Ireland.
We gave a whole year's notice of our intention to do this and I do not think that it was in any way an unreasonable thing for us to ask people to do. Any member of the Armed Forces knows that he is likely to move at short notice, and for the Army this applies particularly to service in Northern Ireland. The Service man knows, also, that he may be sent on 1363 an exercise, or may even come back to Britain on leave. All these things should be taken into account, and I believe we have given people sufficient notice for them to plan ahead.
The 12-months' rule was necessary to deal with a situation which those affected did not foresee and could not have been expected to foresee. That situation no longer obtains. Emergency tours in Northern Ireland have, unfortunately, become a feature of life for many of those serving in Germany. To revert to a 12-months' rule would go beyond the original intention of protecting those who, despite prudent management, had to pay. It could involve heavy cost, with no compensating benefit, and I am afraid that I could not agree to it. I do not think it is asking a great deal of the individual to order his car a little earlier than would otherwise have been the case, in order to reduce the likely cost, to the taxpayer, of reimbursement. This is a privilege and there are many people who would be happy to bring back a 16-months-old car rather than a 12-months-old vehicle without having to pay car tax or VAT.
I am sorry that the hon. Member feels that we have done insufficient to make the arrangements known. However, to ensure that the regulations are known to all concerned, a letter has recently been issued asking commands and districts to draw the attention of all personnel liable to serve on emergency tours in Northern Ireland, whilst serving overseas, to the instructions already issued. It is my general experience that unit commanding officers, knowing their responsibilities, take particular care to ensure that such concessions are well known to those under their command without the need to 1364 repeat a fairly lengthy and detailed piece of promulgation.
The hon. Gentleman referred in correspondence to one commanding officer who claims that these instructions are not widely known. It has always been my understanding that it is the duty of the commanding officer to ensure that the men under his command are aware of instructions issued by my Department. Indeed, if a commanding officer claims that any instruction issued by my Department is not known among his men, he must question how he performs his duties.
I also think that the fact that this debate has taken place will provide some valuable publicity. As the hon. Member knows, my right hon. Friend the Financial Secretary to the Treasury has arranged for Customs officers to advise those who have to pay tax at the ports to apply to the Ministry of Defence if there is any reason to think that they can obtain a refund.
Finally, I think we might put this problem in its context by quoting a few figures, since the hon Member was quoting figures. There are 15,000 men serving in Northern Ireland, of whom about 8,000 are on emergency tour. Of these, 3,800 come from British Army of the Rhine. Therefore, in total, 3,800 men out of an Army of 175,000 are involved at any one time—about two in every 100. Out of these 3,800 men, the hon. Member found only one complainant. That does not suggest to me either that our instructions are not known or that there is any general dissatisfaction with our arrangements.
§ Question put and agreed to.
§ Adjourned acordingly at twenty-nine minutes past One o'clock.