HC Deb 18 December 1975 vol 902 cc1621-3
1. Mr. Ashley

asked the Chancellor of the Exchequer what steps he is taking to tax the perquisites given in British industry.

The Minister of State, Treasury (Mr. Denzil Davies)

The perquisites of an employment which are in cash or can be converted into cash are already taxable and there are special rules governing benefits provided for company directors or employees earning £5,000 a year or more. As my right hon. Friend said in his last Budget Statement, it is his intention to take further action on fringe benefits.

Mr. Ashley

Is my hon. Friend aware that we receive many loud complaints from wealthy Conservatives shouting through the windows of their Rolls-Royces about abuses of the tax system by people on unemployment pay and social security benefits? But is he aware of the abuses of the tax system by a large number of upper management who receive "perks" worth millions of pounds, including interest-free loans, housing, entertainment and a variety of other things? Does he realise that while the Chancellor does nothing the broadest backs get the biggest gift packages? Will he now stop acting as Santa Claus to these people and don the robe of Robin Hood?

Mr. Davies

As my hon. Friend says, there are abuses throughout the tax system and people at the higher levels have a better opportunity to reduce their tax burden than people at the lower levels. As I said, my right hon. Friend is looking at these matters urgently, but I could not anticipate his Budget Statement.

Mr. Grylls

Would the Minister note that, if the Chancellor is to cut fringe benefits in future, he will have to consider lowering the higher rates of tax or even the middle rates of tax, especially for management, since holding management in this country is becoming increasingly difficult because of the competition with similar groups in Europe paying lower rates of tax?

Mr. Davies

The hon. Gentleman should appreciate that people at the lower levels of income also pay high marginal rates of tax and do not have the benefit of the fringe benefits available to people on the higher rates. One must consider the total picture.

9. Mr. Mike Thomas

asked the Chancellor of the Exchequer whether he is satisfied that he is collecting the appropriate amount of revenue under the provisions of Part VIII of the Income and Corporation Taxes Act 1970 in so far as the taxation of loan, mortgage or overdraft facilities provided by employers at less than market rates of interest is concerned; and whether he will now collect information on this topic.

Mr. Denzil Davies

The provision of loan, mortgage or overdraft facilities at less than market rates of interest which does not involve the employer in any expense is not taxable under the provisions of Part VIII of the Income and Corporation Taxes Act 1970. But, as my right hon. Friend said in his last Budget Statement, it is his intention to take further action on fringe benefits.

Mr. Thomas

Is my hon. Friend aware that one cannot conceivably say that when someone gets, as many tens of thousands do, a loan or a mortgage at perhaps 2 per cent. or 3 per cent. interest instead of the going rate of 11 per cent., 12 per cent., 13 per cent. or 14 per cent., that does not constitute a fringe benefit? Is my hon. Friend satisfied with the way in which tax authorities interpret these arrangements? Moreover, is he satisfied with the arrangement, which I understand that many merchant banks have in the City, whereby their directors and senior employees draw on overdraft accounts with their own banks and pay no interest on the money that they borrow?

Mr. Davies

I do not think that it is a case of the tax authorities applying the law, or the way in which they interpret it: it is a loophole in the law. It is extremely difficult to prove that there is an expense to the employer in providing these facilities. This is one fringe benefit among a number. We are looking at this matter closely.

Sir A. Meyer

Will the hon. Gentleman tread a little carefully in this matter? There are, as he is aware, a number of nationalised enterprises which provide preferential rates on mortgages for their employees.

Mr. Davies

Yes, I do not doubt that. This practice is not confined to the private sector, but it is confined in the main to persons with very high incomes. People on high incomes—and those on lower incomes—suffer high marginal rates of tax.