HC Deb 14 July 1976 vol 915 cc753-75
Mr. MacGregor

I beg to move Amendment No. 8, in page 16, line 33, at end insert— '(2) Where an individual occupies living accommodation provided by his employer and by reason of the terms of his employment he is required to reside in the accommodation provided and it is necessary for him to reside on the premises for the proper performance of his duties, that living accommodation shall not be treated as his only or main residence, but instead any land, caravan or houseboat which he purchases and does not let at a commercial rate, but elects to treat as his only or main residence shall be treated for the purpose of Part II of Schedule 1 of the Finance Act 1974 as his only or main residence: Provided that a borrower and his spouse (unless separated) may elect only for one property, caravan or house-boat to be treated as his only or main residence at any particular time. (3) This section shall apply in respect of any interest paid in 1976–77 or any subsequent year of assessment'.

Mr. Deputy Speaker (Mr. Oscar Murton)

With this we may take the following amendments:

No. 9, in page 16, line 33, at end insert— '(2) Where an individual occupies living accommodation provided by his employer and by reason of the terms of his employment he is required to reside in the accommodation provided and it is necessary for him to reside on the premises for the proper performance of his duties, that living accommodation shall not be treated as his only or main residence, but instead any land, caravan or houseboat which he purchases and elects to treat as his only or main residence shall be treated for the purpose of Part II of Schedule 1 of the Finance Act 1974 as his only or main residence: Provided that a borrower and his spouse (unles separated)may elect only for one property, caravan or houseboat to be treated as his only or main residence at any particular time. (3) This section shall apply in respect of any interest paid in 1976–77 or any subsequent year of assessment'. No. 10, in page 16, line 33, at end insert: '(2) In paragraph 4(1) of that Schedule, after paragraph (b), there shall be inserted the following additional paragraph:— or (c) is at the time the interest is paid the only residence of the person by whom it is paid (in this Part of the Schedule referred to as 'the borrower') other than accommodation provided by his employer, and the borrower is an employee who is required by the terms of his employment to reside in the accommodation provided, and it is necessary for him to reside on the premises for the proper performance of his duties,"'. No. 11, in page 16, line 33, at end insert: '(2) "An only or main residence" shall be taken, in the case of a person who is required by his employer to live in a particular place connected with his employment, to include one residence in the United Kingdom which is owned by that person.'.

Mr. MacGregor

The Financial Secretary will recall that we debated this set of problems at length in Standing Committee. I hope, therefore, that it will not be necessary for me to delay the House very long on this occasion.

There is a choice here, as there was in Committee, and my preference is for Amendment No. 10, although even that may be deficient in its drafting. What is most important, however, is that we have a chance to return to these problems. At the end of the debate in Standing Committee, the hon. Gentleman agreed to look again at all the points which had been raised and to see whether it was possible for the Government to move a suitable amendment on Report. I very much regret that they have not done so. The Minister agreed, however, that if they did not do so whe should have the opportunity to return to this matter.

The point is simple. It concerns those people in various occupations who have to live in tied houses for one reason or another. It is not just the 10 per cent. of people who live in tied agricultural cottages, but many others who are in the same situation and to whom the Government have paid no regard at all in their housing difficulties.

The sort of people affected are clergymen, who are still obliged to live in the rectory or the vicarage, which might be described as a tied house; people in employment overseas, or even in this country, who for one reason or another have to live in premises which belong to their employers and which they do not have an opportunity to buy; and Service men, who are in a special position and with whom we dealt at length in Committee.

Before the 1974 Finance Act these people had difficulties in providing homes for their retirement or for the period when they ceased to live in their tied accommodation. In the Services, this occurred at an earlier age than in most other occupations. These groups faced real hardship, because they had the burden of two homes—admittedly they were purchasing only one but they had to maintain and furnish two. This problem of providing a home for retirement was particularly difficult for the clergy, who, by and large, have to live on low stipends. The Financial Secretary himself recognised the position of the clergy in our discussions in Committee.

However, the 1974 Finance Act made the situation much worse for these people. New proposals were brought in on mortgage interest relief, under which such relief was confined to the principal home and any other residence was excluded. This provision was originally intended to apply to people with second homes for holiday purposes, but it drew into the net of tax relief exclusion those people who were in tied accommodation. So, on top of their difficulties in trying to buy a home for their retirement—a home in which they would be resident at all times after retirement—these people faced the added problem of undertaking the purchase of that home without any tax relief on their mortgage payments.

For the clergy, particularly, this means that most of them will be unable to buy a home for their retirement. Since the Finance Act of 1974 the Churches have been in contact with the Chancellor, and there is no doubt that many individual clergymen and the Churches officially view the situation with great concern.

The situation also adversely affects Service men, as they frequently spend much time overseas in their occupation but nevertheless need a home for their families to live in and for their holidays. The only exception that is made is the case in which a person is able to find a dependent relative who can live in the house while that person is trying to acquire it. Tax relief can then be claimed.

But the definition of a dependent relative is a relative of the borrower or spouse who is incapacitated by old age or infirmity from maintaining himself, except that where the relative is his or his spouse's mother and she is widowed, divorced or living apart from her husband, the incapacity provision does not apply.

8.45 p.m.

That is a very limited exclusion. One has either to have a relative incapacitated by old age or infirmity or one must try to ensure that a relative is divorced if one wishes to gain the benefit of the exclusion. That is not a very happy situation.

If the people with whom I am concerned are able to rent out the house that they are trying to buy, that could be offset against the cost of the mortgage, but I think that the Financial Secretary accepted that that will apply in only a very limited number of cases.

Apart from the difficulties of the Rent Act, there are not many cases in which these homes, purchased for retirement, will be easy to rent or to rent at levels to meet the mortgage costs.

Despite the Government's attempts to show that the difficulties are not as severe as they seem, the people concerned find it extremely difficult to purchase their homes when they do not get tax relief on mortgages.

The amendments provide that when a person is in accommodation provided by his employer and is trying to purchase a principal or main residence elsewhere, tax relief should be granted on the purchase of that other residence.

In Committee, the Financial Secretary said that he would produce a number of reasons for objecting to that proposal. I have read his speeches and can find only one reason of substance—the difficulty in defining the main or only residence. The Minister said: It was felt that to give relief for a residence which was not the main residence, or which might be a secondary residence, would be held to contravene the general principle of this relief. The principle of the relief is, naturally, to prevent a subsidy from being given on a second home, or on a holiday home. Tax relief ought, as consequence, to be given for the only or main residence."— [Official Report, Standing Committee E, 27th May 1976; c. 399.] I still do not see that as an overwhelming objection, because all these people are purchasing homes that will be their principal or main residences, but, because of their employment, they have to live elsewhere in the meantime.

I accept that there may be an element of subsidy in relation to the tied accommodation in which they are living, but they have to meet all the costs of purchase and are naturally anxious to purchase a property as early as possible. Inevitably, house prices will continue to rise over the years and these people may not be able to purchase a home on retirement.

The objections to the amendment hang on the point about principal or main residence, but I contend that these properties will ultimately be the principal or main residences of people who propose to buy a property as a family base and not as a holiday or second home.

Unless a concession like this is conceded, these people, unlike every other potential owner-occupier, will never be able to buy their own home and get the normal tax reliefs that are available to everybody else. Unless the amendment is passed, there will be a specific bias against this group.

It is surely not too difficult to draw up a definition of a principal or main residence that will be a family home without risking the Financial Secretary's objection that it will also apply to second and holiday homes.

There is a genuine problem here. It infuriates the clergy and concerns the Churches. It is causing increasing resentment among Service men. I think that the Financial Secretary accepts our case in principle and that we have a genuine point of grievance, which should be met. Therefore, I feel that the technical objections should be overcome and that some- thing along the lines of this amendment should be acepted by the Government.

Mr. David Mudd (Falmouth and Cam borne)

I describe myself as an innocent abroad on the storms of the Finance Bill. The point of my argument will be developed. I shall raise the problems of different sections of the seafaring industry. I hope that I shall obtain reassurances from the Financial Secretary to the Treasury to the effect that I am on a wrong course I apologise in advance if it is proved that I am thinking in the wrong direction.

My fears are not concerned so much with the tied cottage differentials of farmers, clergy and those involved in education and police operations. I am worried about those who are involved in tied cottage operations but who find themselves in a tied cottage situation which occupies 51 per cent. of their time over and above the basic commitment to the tied cottage.

To avoid the bafflement that I may have unwittingly created, let me say this. My problem concerns the Trinity House pilots, lighthouse men, coastguards and Customs officers who, through no fault of their own, often find themselves occupying tied cottages as a consequence of the job they do. As a further consequence of their job, they may find themselves afloat in a Customs or pilot launch or living in a lighthouse for 51 per cent. of their time. As a result of the requirements of their occupation they may be divorced from their shorebound home, which may be regarded as a tied cottage.

I seek an assurance that the Government have no intention at any stage of penalising those who, by virtue of their legitimate calling, find themselves afloat, as a result of their duty, in a home which, although not permanent, they occupy for 51 per cent. of their working time.

Mr. Nott

Does my hon. Friend refer to houses owned by Trinity House? He referred to tied cottages. I am not sure what he meant. I raise the point as I should like to understand what he means.

Mr. Mudd

I am grateful to my hon. Friend for giving me the opportunity of clarifying the point. I have in mind the Coastguard or Trinity House employee who lives in a Trinity House tied cottage when he is on shore but who, by virtue of his job, spends 51 per cent. of his time on the Bishop Rock, Wolf Rock or Eddystone lighthouse. It seems to me that the man involved is becoming more and more tied up as a result of the nature of his job.

Mr. Richard Wainwright (Colne Valley)

Members of the Liberal Party find it disappointing that the Government have not tackled the tied accommodation problem in view of their resources for laying their hands on information and the legal draftsmanship at their disposal. Many civil servants are involved, especially those who do work which most of us would find difficult. Their work is not popular. I refer to the officers of the Prison Service. The hon. Member for Falmouth and Cam-borne (Mr. Mudd) mentioned other valuable servants of the community whose lot is not, on the whole, to be envied.

The Government, if they care for their reputation as a good employer, must consider the plight of those people. I am also thinking of the clergymen of most denominations, especially those with an itinerant ministry, who never know from one year to the next where they will be expected to take their families. These problems are great, and the responsibility rests upon the Government to tackle them. We shall have to do what we can to remedy the Government's deficiency by supporting one or other of these admirable amendments.

An additional responsibility rests upon the Government to tidy up the muddle they created in the Finance Act 1974 when they reintroduced the curious theology of some interests being considered virtuous and admissible but of other interests being rejected.

As the records testify, we on the Liberal Bench, like others, have never been satisfied that the Government had properly thought through what were reasonable objects for borrowing money and incurring interest charges and items which, on the other hand, were rightly considered to be outside the pale for tax relief.

The whole edifice is precarious. The Government ought to have done something to remedy their own jerrybuilding.

Since they have apparently been unwilling or unable to do so, Liberal Members will support whichever of the various amendments, all having the same broad purpose, the Opposition decide to press to a Division.

Mr. Peter Rees (Dover and Deal)

I rise to support the amendments so eloquently moved by my hon. Friend the Member for Norfolk, South (Mr. MacGregor). In doing so, we and the hon. Member for Colne. Valley (Mr. Wainwright) are endeavouring to tidy up the dimly-perceived consequences of the Finance Act 1974 when the Government, in their first careless rapture, were dealing with the social evil of second holiday homes. As often happens, many innocent victims fell before their untrained discharge.

I suppose that every constituency has its own particular group or groups. My hon. Friends have mentioned particular groups in their constituencies. I was delighted to hear my hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) mention Trinity House, which is represented in great measure and distinction in my constituency. I particularly commend the Prison Service, the Armed Services and the clergy, all of which are represented to a great degree and with distinction in my constituency, but perhaps no more and no less than in other constituencies.

The root principle—it is not a technical point but a point of principle, and I hope that the Financial Secretary will deal with it as such—must be whether people, by virtue of their occupations, can be said to have a principal residence independent of that which they occupy by reason of their professional commitments. One might advance the argument, if it were not too legalistic and technical, that, because they are required by virtue of their careers to occupy official houses, they might be said to be in representative occupation of those houses and that, therefore, those houses are ineligible to be classed as their main residences.

Mr. Fairbairn

Not only is it not too legalistic, but it is right.

Mr. Rees

My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) seems to find favour with this argument. But those who are not so well versed in the intricacies of this area of law would no doubt prefer to deal with this matter as a general question of principle.

Let us look at the practicalities. The various categories which have so far had their cases advanced consist of people who probably lead a peripatetic life and are compelled to change their houses many times in the course of their careers. They cannot be said to put down roots in their official residences. It is understandable that, against the day of their retirement when they give up their official residences, they should have acquired what they can regard as their own homes. Therefore, I believe it is right and fair that they should enjoy the same advantages by way of tax relief as the rest of us.

9.0 p.m.

I dislike the perversion of language, which comes so often from the Government Benches, suggesting that this is some kind of subsidy. If it be a subsidy, let it be universally available. The categories that my hon. Friends and I have in mind are apparently not getting that subsidy under the law as it now stands, with two exceptions. By virtue of the exigencies of their employment, the two exceptions are those who are able to let their houses on satisfactory terms and those who are able to place in their homes a dependant in a narrowly-defined range.

I find that a rather unattractive solution to this particular problem. Certainly the difficulties of letting accommodation now are manifest. I do not believe that this is satisfactory for someone in the Armed Services who may want to come back and take up residence in his own home for a short period of about six weeks. He may have considerable difficulty in finding a tenant who is prepared to take the property on those terms. He may find that the tenant would take him through all the rigmarole of the courts. I do not think that the Minister will rest his case on that argument. I think that there is a basis in equity and principle why this claim should be conceded.

The Financial Secretary was disposed to look at this argument with some favour in Committee. I regret very much that we have not had a Government amendment on this subject. I am not saying that there has been any breach of faith. Perhaps the pressures on the Financial Secretary have been such that he has not been able to apply his mind to the problem. He cannot give that excuse now, because the eloquent speeches from this side must have focused his mind on the true principles at stake.

I think it was on a closely-related problem, with all the relief of the capital gains tax which is afforded to people who have a principal main residence, that the hon. Gentleman said in Committee that there was some kind of extra statutory concession available. I always view extra-statutory concessions with extreme repugnance. If it is to be dealt with in this way, could we perhaps, for the benefit of the House and of those who study our debates outside, spell out in more detail or particularity what that extra concession is?

I think it has been amply demonstrated from these Benches that there is a good case in principle and equity for affording this relief—do not let us call it a subsidy—on the various categories which have already been deployed. I think that some of my hon. Friends could add to them.

I very much hope that the Financial Secretary will allow his natural generosity full rein in this respect and that he will be able to tell us that he has considered our amendments and is prepared to accept the best of them. In my humble view Amendment No. 9, which would give an election to the taxpayer, is possibly the best of them. I very much hope that the Minister will be able to accept it.

Mr. Fairbairn

I have been most impressed by the observations of my hon. and learned Friend the Member for Dover and Deal (Mr. Rees). The Financial Secretary should understand that we are not dealing with a privileged class although, undoubtedly, the intentions of the Finance Act are to destroy what the Government imagine are a privileged class. The people for whom we are seeking relief form an under-privileged class.

I have a brother who is in a tied house. It is extremely unfortunate that he is not able to obtain a family home, because he is forced to live in a tied house that will never belong to him. Eventually, upon his retirement, he will somehow have to obtain a house of his own for his family. Far from being a privileged class, those for whom we are concerned are people who have the very grave difficulty of not having the privilege of a permanent home.

Nothing, I would have thought, was more difficult for a family than constantly having to move from one house to another, which does not belong to them, so that they cannot commit themselves to a permanent home, a permanent residence and a permanent family establishment.

I fear that the motivation that may influence the Financial Secretary—I hope that his generosity of spirit will for once overcome the principles of Socialism—is the resentment that someone may get away with two homes. Some men may have a house in my constituency but live in London. Some awful people may actually have two homes, like the right hon. Member for Huyton (Sir H. Wilson), who has three. Some terrible person may have accepted the nomination for the Presidency of the European Commission at a salary of £60,000 net, and may therefore be able to pay for mortgages on various homes. Such people may get away with it, and since they are Socialists it does not matter.

But why be vindictive against those who are successful? We do not mind the right hon. Member for Huyton or the Home Secretary being successful. Apparently, Labour Members do not mind either. So why be vindictive in order to prevent few people from obtaining something? Why be malevolent, in the words of my right hon. and learned Friend, in order to tweak off one or two successful people who have two homes? Why make it impossible for those in peripatetic professions who are compelled to have tied houses to obtain these benefits? I am sure that they would rather have permanent homes.

This is a matter of grave injustice and I ask the Financial Secretary to consider it as such. We might let off the hook one or two spivs. Very well—let the spivs go. Let us do justice to those who serve their country.

Mr. Robert Sheldon

The hon. Member for Falmouth and Camborne (Mr. Mudd) asked about lighthouse men. There are two problems here. The first concerns the lighthouse man who owns his own house—probably buying it on mortgage—and who spends his time afloat. If his wife and family are resident there, he is eligible for mortgage relief. The hon. Gentleman may have been referring, however, to someone living in a Trinity House cottage—a tied home. He will not be eligible for mortgage relief but he will come into a category with whom I shall deal later.

The hon. Member for Colne Valley (Mr. Wainwright) talked about clergymen and the hon. and learned Gentleman for Dover and Deal (Mr. Rees) asked about only or main residences, and the details of the extra-statutory concession. I have those details, and they make fairly turgid reading. I gave an explanation in Committee. I could give the hon. and learned Gentleman all the details now or, alternatively, I could send them to him.

Mr. Peter Rees

Now, please.

Mr. Sheldon

Very well. Section 29(7) of the Finance Act 1965 allows a taxpayer to choose which residence is to be regarded as his main residence for capital gains tax purposes. An occupant of tied accommodation who owns another house may therefore nominate the house he owns as his main residence, provided both that it is available to him for residential purposes and that he resides there at regular intervals. Each case will have to be considered on its own facts.

Section 29(7) requires that any nomination should be made within two years of acquisition of the second residence. Where, however, the occupants of tied accommodation have been unaware of the need to make a nomination under the subsection and the time limit is past, inspectors will be prepared to accept a late notice of nomination. Those are the details for which the hon. and learned Member asked.

Mr. Peter Rees

The difficulty I foresee arises in the case where a person has let his house while he has been away on foreign service. He may have let it for a considerable period. Would the inspector be prepared to accept a nomination in that situation?

Mr. Sheldon

I shall be coming to the general problems in the course of my remarks. That is probably the most important aspect with which I shall be dealing.

Mr. Lawson

Is it necessary that the house that is nominated as the principal residence for capital gains tax purposes shall be the same house that is the principal residence for mortgage interest relief for tax purposes? Must it be the same house?

Mr. Sheldon

It would be the only house that was owned, otherwise the point would not arise. One could hardly nominate a tied home that one did not own. We are considering the situation in which two homes are owned, one of which is nominated, possibly under the terms of the extra-statutory concession.

The amendment provides for those living in tied accommodation and seeks to obtain for them the utmost relief for interest on loans—namely, on the purchase of a property. In Committee I undertook to consider the matter further and I envisaged two main groups. There are those in tied accommodation purchasing for their retirement and there are others—mention was made of them in a number of contributions to this debate— who have left their homes for tours of service overseas or elsewhere in the United Kingdom.

The solution that I suggested was to let the property, until the owner was able to re-occupy, in the case of a person who went on a tour of service, or until retirement for those who purchased for that purpose. In that way the owners would find that they would be able to have their mortgage interest set off against the rent. That would provide no disadvantage to them, and would have the welcome effect of making the best use of the available housing stock. In Committee I mentioned the leaflet issued by the Department of the Environment entitled "Letting Your Own Home?" It is a useful guide on how to avoid what some would call the pitfalls, which appear to be readily capable of being avoided when examined.

I have considered the arguments that have been adduced on possible relaxations. First, I shall deal with temporary absences. From the inquiries that I have been able to carry out in the limited way that has been available to me, it seems that there are many people who make arrangements to let their own homes in a way that does not lose them their mortgage relief. There are parts of the country in which there are a number of such lettings. There are communities where such lettings are a fairly common feature.

People let their own homes in that way for very good reasons. They do so to avoid losing mortgage relief, and partly to ensure that the fabric of the house is maintained. If the property is let, the fabric is looked after in a way that is not possible when a property is left vacant. However, there will be a number of hard cases where, for various reasons, such provisions will not be possible.

9.15 p.m.

In view of that I have considered the relaxation of the existing rules. If a person is required by his employment to move from his home, either overseas or elsewhere in the United Kingdom, for a period not expected to be more than four years, the property will still be treated as the only or main residence. There are two conditions which I believe can easily be met. The first is that the property was the person's only or main residence before he went away. The second is that it can reasonably be expected to continue to be his only or main residence after his return. That is a considerable advance over the one year that is normally allowed at present.

I come to the second category—tied accommodation. The hon. and learned Member for Dover and Deal argued the case for clergy, prison governors and other categories, including certain school teachers. The problem presents great difficulty. These are people who already have living accommodation, sometimes rent-free and sometimes at a nominal rent. Sometimes they are not prepared to let the property, because they desire to use it as a weekend or holiday home. We should be realistic about that. No one is against such people using their houses as holiday homes but tax relief for that purpose is a difficult proposition to accept. Once we allowed tax relief for holiday homes it would be difficult to withstand argument for similar relief on the purchase of holiday homes to be given to people living in other forms of rented accommodation, or even council houses.

The hon. and learned Member for Dover and Deal referred to the right to choose the only or main residence. That is to open the provision very wide. It means that virtually anyone who rented a home would have the power to choose as his only or main residence a holiday home, a caravan, or something of that sort. Once we did that we should be moving on to very difficult ground. Such a right would not only be expensive; it would need to be set in the context of the general housing policy. For that reason, I am unable to accept a general relaxation. Nevertheless, taking into account some of the arguments used effectively in Standing Committee and to a lesser extent in the House, I am prepared to undertake to look again at this matter.

I am particularly concerned about the clergy, to whom special factors apply. On 18th May I announced the setting up of a review to examine the distinction between representative and beneficial occupation in connection with the taxation of benefits. The issue before us turns on the question of accommodation provided with a person's job. I propose to have this matter re-examined together with the other review, which covers several closely related problems. If it is possible to give some limited relaxation, I shall be happy to bring forward proposals to the House when this information is available. Naturally, I cannot comment on what proposals may emerge, but I have expressed my general view, which I hope commends itself to the House.

Mr. Peter Rees

These matters have dragged on for a considerable time. When does the hon. Gentleman expect to receive the result of the review? Those whose case we have deployed from the Opposition Benches wish to know whether they can expect some relief in the fairly near future.

Mr. Sheldon

I cannot promise a date, and the hon. and learned Gentleman would not expect me to give a date. I want the inquiry to be as expeditious as possible.

Mr. Fairbairn

Is the Financial Secretary seriously suggesting that he thinks it likely, or even possible, that many people will be able to rent houses and buy other houses to abuse the system? That does not seem to be a likely proposition, but that is what he has said he fears. Does he really regard that as a likely manifestation of attitude if he makes a general relaxation?

Mr. Sheldon

The hon. and learned Member misunderstands me. I was saying that there were a number of cases where the main purpose was to obtain tax relief for a holiday home. That kind of relaxation could extend to many people in not dissimilar circumstances.

Mr. Nott

I suppose that the Financial Secretary has tried to help. I do not wish to be too critical, because we welcome the tone he used in answering the debate, but his remarks do not take us far enough.

I wish to thank my hon. Friend the Member for Norfolk, South (Mr. MacGregor) for raising this important matter here and in Committee. I also want to thank others of my hon. Friends who have demonstrated the wide range of provisions which are affected by this new legislation. My hon. Friend the Member for Falmouth and Camborne (Mr. Mudd) mentioned Trinity House and coastguards, while my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) mentioned members of the Prison Service. Fire officers also are involved, and the clergy are the best-known examples. The police and members of the Armed Services are also affected. Every hon. Member knows of a Service man in his constituency who is affected. There are also members of the Civil Service and the Diplomatic Service —who are not short of untaxable fringe benefits—who have a genuine problem over mortgage interest relief when serving overseas.

The Financial Secretary is obviously genuinely concerned about such cases and he has made some attempt to look into them. I shall deal with two categories which he selected. First, I shall deal with those who are moving abroad and who, by the nature of their jobs, have to move to other accommodation. The Financial Secretary said that he was prepared to extend the practice of the Inland Revenue to give extra-statutory concessions. Of course the Inland Revenue must have some discretion when dealing with individual cases, otherwise our statute book would be even worse than it is. I do not dissent from the Inland Revenue having some discretion, but I agree with my hon. and learned Friend the Member for Dover and Deal, who said that he would like it all to be enshrined in the statute book. There will always be areas where an element of discretion must be given to the Inland Revenue.

Mr. Robert Sheldon

Perhaps I can clarify the matter. The definition of "only or main residence" is the issue involved.

Mr. Nott

I accept that discretion may be necessary in certain cases, but it is not satisfactory that the Revenue's discretion should be extended from one to four years. That does not seem to be the way to handle the matter. Such wide discretion should be in statutory form.

One must ask "Why four years?" A person might have a tour of duty lasting four and a half or five years. I am not being niggardly, but an engineer, for instance, might be sent to the Middle East for longer than four years. It would have been better if the Financial Secretary had decided to allow the Revenue complete discretion to look at the facts of an individual case and to make a decision on them. That is not the main point I am making, but I think my hon. Friends will agree that the matter should be enshrined in statutory form.

Mr. MacGregor

The four-year discretion will more easily help members of the Diplomatic Service than most other groups. One suspects that it may have been given mainly to meet their situation. Is it not the case that none of our other groups except people in companies with short service abroad will be helped by it?

Mr. Nott

That may be the case. I do not know the reason for choosing four years.

Mr. Robert Sheldon

A three-year period is about the normal maximum tour. Beyond three years, one is almost moving one's residence. I thought that this represented pretty well a maximum tour in ordinary service. I tried to be as helpful as possible in extending the period as much as I could.

Mr. Nott

I think that the hon. Gentleman was trying to be helpful, but most Englishmen, even if they are working abroad for 10 years, want to retain roots in their own country, and this desire usually finds expression in a home to which they return on long leave.

Mr. Costain

In a company such as BP, people generally do four tours of three years. Does each tour count separately, or will they be aggregated?

Mr. Nott

My hon. Friend raises a fair point, but I am not the Minister and I am not here to answer those questions. I am trying to make a point on which I think all my hon. Friends agree.

What about the person employed by Shell, or the police officer, the fire officer or the business man, or even the diplomat who, while abroad, decides to buy a home? Why should there be a distinction between the man who happens to have bought a home in England and a week later goes on a tour overseas and the man who is abroad but nips back and buys a house, which becomes his principal place of residence and for all intents and purposes, if not in tax terms, becomes his home? I understand that the man serving away from the place that he wishes to be his home base will not come within the Revenue's discretion.

I am not criticising the Minister but am pointing out the flaws in what is proposed. I believe that the matter would be covered by our amendments.

Mr. Lawson

This is a very important matter. There may be missionaries in Uganda who might feel that it was time to buy a home in this country. The amendment would deal with that, but the Financial Secretary and the Government are resisting it.

Mr. Nott

The missionary in Uganda is a good example, as is the diplomat, perhaps a member of the High Commission in Kampala. I have made my point and I think that the Financial Secretary has it on board. I am not happy with the discretion, which is too tight and does not cover the point.

I come to another area in which I much more greatly dissent from what the Financial Secretary suggests. I refer to the clergyman in tied accommodation. I. understand that we shall have to look at the concept of representative occupation because of the tax-free comfort in which ministers live, and that the matter has all come up for review as a result of the criticism this year. The police house case is the excuse for reviewing the comfort in which ministers live without paying tax on their benefits. Because the Financial Secretary wants to help, he is to throw the clergy in with the Chancellor of the Exchequer and consider them all as part of the interdepartmental review. We want to help the clergy rather more than the Chancellor.

9.30 p.m.

I do not regard the point made by the Financial Secretary about possible abuse under our proposals as relevant. Our amendments deal with those who live in tied accommodation. They are surely a well-understood category of people. They have nothing to do with somebody who lives in a council house going off and buying a holiday home. If such a tenant buys a holiday home, it will be difficult to draw legislation in such a way that he may obtain tax relief on that home. Many council tenants, given the management of their housing estates, may feel that they live in a quasi-slavery. The fact is, however, that council tenants do not live in tied accommodation, and very few of them would go out and buy private accommodation while continuing to live in council homes.

Next Thursday, subject to any further change, the House will debate the legislation on the tied agricultural cottage. We all know the meaning of that term. We are not talking about council tenants who obtain mortgage relief on large plush residences. Therefore, the Minister's argument does not make sense.

All these problems stem from the Finance Act 1974. Here we are in 1976 and nothing has happened. Yesterday we heard about the interdepartmental committee on forestry, but it is more than a year since capital transfer tax was introduced. Furthermore, a period of two years has elapsed since the 1974 Act put the clergy in this situation. This is not good enough. Something should have been done about the situation earlier, because the Church authorities have been pressing this matter for two years or more.

Our amendments are clear and specific. The Financial Secretary has not said what is wrong with them. Because we feel that there is a genuine case affecting the police, prison officers, coastguards, the clergy in particular and the Armed Forces—and they are not covered by what the Financial Secretary said today —we feel that we should divide the House. I think that it would be most suitable, Mr. Deputy Speaker, to divide on Amendment No. 9.

Mr. George Cunningham

Why are the Opposition dividing? They know that they will lose.

Mr. Nott

I had not quite sat down. Let me say to the hon. Gentleman—

Mr. Mark Hughes (Durham)

On a point of order, Mr. Deputy Speaker. I clearly saw the hon. Gentleman's posterior reach his seat. That means that he had sat down.

Mr. Deputy Speaker

The hon. Gentleman changed his mind.

Mr. Nott

Surely I know better than the hon. Gentleman whether I have sat down. The hon. Member for Islington, South and Finsbury (Mr. Cunningham) should not assume that all Labour Members will go blindly through the Division Lobby on every occasion when the Government have a bad case. There are surely some Labour Members who will have sympathy with the situation of the clergy, the Armed Forces, Trinity House officers, coastguards, fire officers and police officers who do not obtain mortgage relief on their homes.

Mr. Deputy Speaker

The Chair will put the Question on Amendment No. 8, which can be negatived if so desired. I understand that the matter for Division will be Amendment No. 9.

Amendment negatived.

Amendment proposed: No. 9, in page 16, line 33, at end insert: '(2) Where an individual occupies living accommodation provided by his employer and by reason of the terms of his employment he is required to reside in the accommodation provided and it is necessary for him to reside on the premises for the proper performance of his duties, that living accommodation shall not be treated as his only or main residence, but instead any land, caravan or houseboat which he purchases and elects to treat as his only or main residence shall be treated for the purpose of Part II of Schedule 1 of the Finance Act 1974 as his only or main residence: Provided that a borrower and his spouse (unless separated) may elect only for one property, caravan or houseboat to be treated as his only or main residence at any particular time.

(3) This section shall apply in respect of any interest paid in 1976–77 or any subsequent year of assessment'.—[Mr. Nott.]

Question put, That the amendment be made:—

The House divided: Ayes 174, Noes 193.

Division No. 248.] AYES [9.34 p.m.
Adley, Robert Harrison, Col Sir Harwood (Eye) Morrison, Hon Peter (Chester)
Aitken, Jonathan Harvie Anderson, Rt Hon Miss Mudd, David
Awdry, Daniel Havers, Sir Michael Neave, Airey
Bain, Mrs Margaret Hawkins, Paul Nelson, Anthony
Baker, Kenneth Hayhoe, Barney Newton, Tony
Beith, A. J. Henderson, Douglas Nott, John
Bell, Ronald Heseltine, Michael Oppenheim, Mrs Sally
Bennett, Dr Reginald (Fareham) Holland, Philip Page, John (Harrow West)
Benyon, W. Hooson, Emlyn Page, Rt Hon R. Graham (Crosby)
Bitten, John Hordern, Peter Parkinson, Cecil
Blggs-Davison, John Howell, Ralph (North Norfolk) Penhaligon, David
Boscawen, Hon Robert Howells, Geralnt (Cardigan) Rees, Peter (Dover & Deal)
Bottomley, Peter Hunt, John (Bromley) Rees-Davies, W. R.
Brittan, Leon Hurd, Douglas Reid, George
Brocklebank-Fowler, C. Irving, Charles (Cheltenham) Renton, Rt. Hon Sir D. (Hunts)
Brotherton, Michael Jessel, Toby Rhys Williams. Sir Brandon
Brown, Sir Edward (Bath) Johnson Smith, G. (E Grinstead) Ridsdale, Julian
Buchanan-Smith, Alick Johnston, Russell (Inverness) Roberts, Michael (Cardiff NW)
Budgen, Nick Joseph, Rt Hon Sir Keith Rodgers, Sir John (Sevenoaks)
Bulmer, Esmond Kershaw, Anthony Ross, Stephen (Isle of Wight)
Burden, F. A. Kilfedder, James Rossi, Hugh (Hornsey)
Butler, Adam (Bosworth) Kimball, Marcus Rost, Peter (SE Derbyshire)
Chalker, Mrs Lynda King, Evelyn (South Dorset) Sainsbury, Tim
Clark, William (Croydon S) King, Tom (Bridgwater) St. John-Stevas, Norman
Clarke, Kenneth (Rushcliffe) Kirk, Sir Peter Scott-Hopkins, James
Clegg, Walter Kitson, Sir Timothy Shaw, Michael (Scarborough)
Cooke, Robert (Bristol W) Knight, Mrs Jill Sims, Roger
Cope, John Knox, David Sinclair, Sir George
Cormack, Patrick Lamont, Norman Skeet, T. H. H.
Costain, A. P. Langford-Holt, Sir John Smith, Cyril (Rochdale)
Crawford, Douglas Latham, Michael (Mellon) Speed, Keith
Douglas-Hamilton, Lord James Lawrence. Ivan Spence, John
Dunlop, John Lawson, Nigel Sproat, Iain
Dykes, Hugh Lewis, Kenneth (Rutland) Stainton, Keith
Eden, Rt Hon Sir John Luce, Richard Stanbrook, Ivor
Edwards. Nicholas (Pembroke) MacCormick, Iain Steel, David (Roxburgh)
Emery, Peter McCrindle, Robert Stewart, Ian (Hitchin)
Ewing, Mrs Winifred (Moray) McCusker, H. Stradling Thomas, J.
Eyre, Reginald MacGregor, John Tapsell, Peter
Fairgrieve, Russell Macmillan, Rt Hon M. (Fernham) Tebbit, Norman
Fell. Anthony McNair-Wilson, M. (Newbury) Thatcher, Rt Hon Margaret
Fletcher-Cooke, Charles Madel, David Thompson, George
Forman, Nigel Marshall, Michael (Arundel) Trotter, Neville
Fowler, Norman (Sutton C'f'd) Marten, Neil Tugendhat, Christopher
Fox, Marcus Mather, Carol Wainwright, Richard (Colne V)
Fry, Peter Maude, Angus Walder, David (Clitheroe)
Gardner, Edward (S Fylde) Maudling, Rt Hon Reginald Walker-Smith, Rt Hon Sir Derek
Gilmour, Sir John (East Fife) Mawby, Ray Wall, Patrick
Goodhew, Victor Maxwell-Hyslop, Robin Warren, Kenneth
Goodlad, Alastair Mayhew, Patrick Watt, Hamish
Gorst, John Meyer, Sir Anthony Weatherill, Bernard
Gow, Ian (Eastbourne) Mills, Peter Welsh, Andrew
Gower, Sir Raymond (Barry) Miscampbell, Norman Wilson, Gordon (Dundee E)
Gray, Hamlsh Moate, Roger Winterton, Nicholas
Grimond, Rt Hon J. Monro, Hector Young, Sir G. (Ealing, Acton)
Grist, Ian Montgomery, Fergus
Grylls, Michael More. Jasper (Ludlow) TELLERS FOR THE AYES:
Hall_Davis. A. G. F. Morris, Michael (Northampton S) Mr. Spencer Le Marchant and
Hampson, Dr Keith Morrison, Charles (Devizes) Mr. Jim Lestor.
Hannam, John
Abse, Leo Bean, R. E. Brown, Hugh D. (Provan)
Allaun, Frank Benn, Rt Hon Anthony Wedgwood Brown, Robert C. (Newcastle W)
Anderson, Donald Bennett, Andrew (Stockport N) Buchan, Norman
Archer, Peter Blenkinsop, Arthur Buchanan, Richard
Armstrong. Ernest Boardman, H. Callaghan, Rt Hon J. (Cardiff SE)
Ashley, Jack Booth, Rt Hon Albert Callaghan, Jim (Middleton & P)
Ashton, Joe Boothroyd, Miss Betty Campbell, Ian
Atkins, Ronald (Preston N) Boyden, James (Bish Auck) Canavan, Dennis
Atkinson, Norman Bradley, Tom Cant, R. B.
Barnett Guy (Greenwich) Bray, Dr Jeremy Carmichael, Nell
Clemitson, Ivor Hughes, Roy (Newport) Phipps, Dr Colin
Cocks, Michael (Bristol S) Hunter, Adam Prescott, John
Cohen, Stanley Irving, Rt Hon S. (Dartford) Price, William (Rugby)
Coleman, Donald Jackson, Colin (Brighouse) Radice, Giles
Conlan, Bernard Jackson, Miss Margaret (Lincoln) Rees, Rt Hon Merlyn (Leeds S)
Cook, Robin F. (Edin C) Jay, Rt Hon Douglas Richardson, Miss Jo
Corbett, Robin Jeger, Mrs Lena Roberts, Albert (Normanton)
Cox, Thomas (Tooting) John, Brynmor Robinson, Geoffrey
Craigen. J. M. (Maryhill) Johnson, James (Hull West) Roderick, Caerwyn
Crawshaw, Richard Jones, Barry (East Flint) Rodgers, George (Chorley)
Crowther, Stan (Rotherham) Jones, Dan (Burnley) Rodgers, William (Stockton)
Cryer, Bob Kelley, Richard Rooker, J. W.
Cunningham, G. (Islington S) Kilroy-Silk, Robert Roper, John
Cunningham, Dr J. (Whiteh) Lambie, David Rose, Paul B.
Dalyell, Tam Lamborn, Harry Ross, Rt. Hon W. (Kilmarnock)
Davies, Bryan (Enfield N) Lamond, James Selby, Harry
Davies, Denzil (Llanelli) Latham, Arthur (Paddington) Sheldon, Robert (Ashton-u Lyne)
Davies, Ifor (Gower) Leadbitter, Ted Short, Rt Hon E. (Newcastle C)
Deakins, Eric Lee, John Short, Mrs Renée (Wolv NE)
Dean, Joseph (Leeds West) Lewis, Ron (Carlisle) Skinner Dennis
de Freitas, Rt Hon Sir Geoffrey Litterick, Tom Small, William
Dempsey, James Loyden, Eddie Snape, Peter
Doig, Peter McCartney, Hugh Stallard, A. W.
Dormand, J. D. McElhone, Frank Stewart, Rt Hon M. (Fulham)
Douglas-Mann, Bruce MacFarquhar, Roderick Stoddart, David
Duffy, A. E. P. McGuire, Michael (Ince) Stott, Roger
Dunwoody, Mrs Gwyneth MacKenzie, Gregor Strang, Gavin
Ellis, John (Brigg & Scun) Mackintosh, John P. Summerskill, Hon Dr Shirley
English, Michael Maclennan, Robert Thomas, Dafydd (Merioneth)
Ennals, David McMillan, Tom (Glasgow C) Thomas, Jeffrey (Abertillery)
Evans, Fred (Caerphilly) McNamara, Kevin Thomas, Mike (Newcastle E)
Evans, Gwynfor (Carmarthen) Magee, Bryan Thomas, Ron (Bristol NW)
Evans,Ioan (Aberdare) Mahon, Simon Tierney, Sydney
Ewing, Harry (Stirling) Marks, Kenneth Tinn, James
Fernyhough, Rt Hon E. Marshall, Dr. Edmund (Goole) Tuck, Raphael
Flannery, Martin Mason, Rt Hon Roy Walden, Brian (B'ham, L'dyw'd)
Foot, Rt Hon Michael Maynard, Miss Joan Walker, Terry (Kingswood)
Fowler, Gerald (The Wrekin) Mellish, Rt Hon Robert Ward, Michael
Freeson, Reginald Millan, Bruce White, Frank R. (Bury)
Garrett, John (Norwich S) Miller, Dr M. S. (E Kilbride) White, James (Pollok)
Gilbert, Dr John Molloy, William Whitehead, Phillip
Golding, John Moonman, Eric Wigley, Dafydd
Gourlay, Harry Morris, Alfred (Wythenshawe) Willey, Rt Hon Frederick
Graham, Ted Morris, Charles R. (Openshaw) Williams, W. T. (Warrington)
Grant, George (Morpeth) Murray, Rt Hon Ronald King Wilson, Alexander (Hamilton)
Grocott, Bruce Ogden, Eric Wilson, William (Coventry SE)
Hamilton, James (Bothwell) O'Halloran, Michael Wise, Mrs Audrey
Hardy, Peter Orbach, Maurice Woodall, Alec
Harrison, Waller (Wakefield) Ovenden, John Woof, Robert
Hart. Rt Hon Judith Owen, Dr David Wrigglesworth, Ian
Hatton, Frank Padley, Walter Young, David (Bolton E)
Heffer, Eric S. Palmer, Arthur
Horam, John Park, George TELLERS FOR THE NOES:
Hoyle, Doug (Nelson) Parker, John Mr. Joseph Harper and
Hughes, Mark (Durham) Parry, Robert Mr. Alf Bates.
Hughes, Robert (Aberdeen N) Pendry, Tom

Question accordingly negatived.

Forward to