§ Mr. CormackI beg to move Amendment No. 142, in page 59, line 22, leave out 'and (b)' and insert—
'or(b) the value transferred by it is attributable to income property which arises from, or is comprised in, supporting property designated under subsection (1D) below which becomes comprised in a settlement; and(c)'.I do so on behalf of my hon. Friend the Member for Bristol, West (Mr. Cooke).
§ Mr. SpeakerWith this, we are taking the following Amendments:
No. 268, in page 59, line 26, leave out
'by virtue of a transfer of value exempt under this section'and insert'in respect of which the Treasury gives such a direction'.No. 144, in page 59, line 27, at end insert—'(1A) Property appropriate in character and amount designated under subsection (1D) below may be set aside for the support of 1102 property qualifying under this section provided that it is held under the requisite undertaking under subsection (1B) below and such property is referred to in this section as "supporting property".(1B) The requisite undertaking to be given with respect to supporting property by such person as the Treasury think appropriate in the circumstances of the case is that, until the person beneficially entitled to the supporting property dies or designation is withdrawn, reasonable steps shall be taken to manage it for the benefit of the qualifying property it is to support in accordance with and as may be directed under regulations made under subsection (1C) below.(1C) The Treasury may by regulations make provision generally with regard to the implementation of undertakings given under subsection (1B) above and such regulations may include provision for—
- (a) the management of the supporting property;
- (b) the keeping of appropriate records as to the ownership and nature of supporting property, accounts appertaining thereto and the rendering of returns thereon;
- (c) the withdrawal of designation on supporting property whether by the owner or by direction of the Treasury after the giving of notice for such periods as may be prescribed;
- (d) the transfer of all income arising from the supporting property into a settlement such as is referred to in this section;
- (e) the transfer of capital comprised in the supporting property into the said settlement at the owner's discretion:
- (f) the application of such sums as may be transferred to the owner or manager of the supporting property from the said settlement in the manner that the trustees may direct for the purpose of protecting or enhancing the qualifying property or increasing the value of any benefit arising from the supporting property for the qualifying property.
(1D) The Treasury may, on a claim made at any time under this section, designate supporting property with respect to qualifying property which, in its opinion, it is desirable to support with the income or capital derived from the supporting property.(1E) Designated supporting property shall be treated as though it were designated under sections 70–77 above and—
- (a) lifetime transfers of supporting property made with the consent of the Treasury and transfers of it under section 22 of the Finance Act 1975 shall be conditionally exempt transfers; and
- (b) distribution payments and capital distributions of supporting property shall be conditionally exempt distributions; and
- (c) a chargeable event arising in relation to the whole of the qualifying property shall be treated as being a chargeable
1103 event with respect to the supporting property and have the effect of withdrawing designation therefrom; and - (d) sections 70–77 shall have effect as though they included references to designated property.
(1F) Property already comprised in or transferred into a settlement may be designated as supporting property.'.
§ No. 269, in page 59, line 39, leave out '(a)'.
§
No. 270, in page 60, leave out lines 11 to 13 and insert
'if trustees set aside a separate fund for the purposes of this section and give to the Treasury a written undertaking that they will not during the continuance of the settlement apply any capital or income of that fund otherwise than as aforesaid, then so long as that undertaking is observed the fund shall be treated as comprised in a separate settlement and that settlement shall be treated as complying with the requirements of subsection (2)(a) above (whether or not they would me so treated but for this provision).
(3A) On the termination of a settlement in respect of which the Treasury has given a direction under this section, tax shall be charged in the manner provided in sub-paragraphs (5) to (9) of Paragraph 17 of Schedule 5 to the Finance Act 1975 unless and except so far as—
§ I understand that the hon. Member for Bristol, West (Mr. Cooke) feels that it would be right to discuss also the following amendments:
§ No. 147, in page 60, line 10, leave out from 'below' to end of line 13.
§
No. 246, in page 60, line 10, leave out 'and' and insert
'or
§ No. 247, in page 60, line 12, leave out 'property' and insert 'income'.
§
No. 248, in page 60, line 13. at end insert—
1104
'(c) that on the termination of the settlement the capital comprised in it may be applied for the benefit of—
and none of the remaining capital can devolve otherwise than on such a body or charity as aforesaid.
§ (3A) None of the capital comprised in a settlement by virtue of a transfer on which a direction has been made under subsection (1) above may be made the subject of an exempt capital distribution made under subsection (3)(a)(iii) or (c)(i) above until after the expiry of seven years from the date of the transfer into the settlement.
§ (3B) where a capital distribution is made under subsection (3)(a)(iv) or (c)(ii) above, that distribution shall not be treated as exempt under this section with the effect that the provisions of sections 73 to 75 above shall apply'.
§ Mr. Robert CookeYes, Mr. Speaker. They are all related to the same clause and point.
§ Mr. CormackThank you. Mr. Speaker, for enabling us to clarify that. My hon. Friend the Member for Bristol, West has asked me to move this amendment, which I gladly do. I think that it would be helpful if I had the Minister's attention, because I am not seeking to move the amendment in any spirit of hostility.
The Financial Secretary will probably agree that there is an almost unanimous desire in both the House and the country that the proper importance of heritage properties should be recognised. The Minister will probably also accept that there is a large measure of all-party agreement that our heritage properties. particularly our historic houses, can best be economically maintained and safeguarded by their owners. I think that that is why the Government themselves have included Clause 78. We welcome that and we thank them for it.
I think it is understood that the Government felt that the clause should be tightly drawn, but we are seeking to point out that it has been so tightly drawn that very few owners of heritage properties, and the few with the most spectacular properties to display, will contemplate taking advantage of the facilities offered within the clause. We cannot believe 1105 that that was the Government's intention. All that our amendments seek to do, although they are probably imperfectly drafted, is to widen the coverage in order to enable similar advantages to be enjoyed by all house sof intrinsic importance and interest.
We are asking the Government to receive these amendments in the spirit in which I am seeking to discuss them. The amendments have a large measure of all-party support within the House, in the form of the all-party Heritage Group, and they also have a tremendous amount of support outside the House. All the important national amenity and heritage societies support the principle and philosophy behind these amendments. That is particularly the case with the most important of all those bodies, the National Trust. I hope that the Minister will take this point particularly to heart. I am quite certain that everybody who recognises the importance of the heritage and of the preservation of our most important buildings will wish to do something to extend the scope of Clause 78.
I remind the Minister of the enormous dollar and foreign currency earning potential of our heritage properties. Tourism already ranks very high in our list of industries, and one of the principal magnets for tourists is the corpus of heritage properties in this country. I know that the Minister and the Government recognise this, and I hope it will be the wish of the Government to do everything possible to ensure the survival of these properties in the best possible form.
Coming, as this does, closely on European Architectural Heritage Year and preceding, as it does, Education Heritage Year, which will come next year, I hope that the Minister will listen with particular sympathy to what we are seeking to say tonight, not in any hostile spirit, but in a helpful way.
If the hon. Gentleman feels that he cannot accept these amendments tonight, I hope that at least he will give a promise that he is prepared to meet hon. Members who are particularly concerned about this matter. I hope he will allow us to bring representatives of the amenity and heritage societies to discuss the issue with him, so that on a future occasion, and in the next Finance Bill, 1106 the scope of the clause can be extended along the lines we are suggesting tonight.
I do not want to detain the House further at this very late hour, but this is a subject of particular importance and it is one which is close to the hearts of many hon. Members. Although the Government have shown some sympathy, and we appreciate it, we feel that the clause is so tightly drawn that, unless amendments along these lines are made, the Government's intentions will be frustrated by their own draftsmen's endeavours.
§ Mr. FarrI endorse and support what has been said by my hon. Friend the Member for Staffordshire, South-West (Mr. Cormack). I have no interest to declare in this matter—I am not even a member of the Heritage Group in the House—but I know from my experience how great is the value of our heritage of ancient and historic buildings. However, I do not wish to appeal to the House purely from that angle. I shall stress the great importance of our ancient buildings to tourism. My authority for that statement is the present Chairman of the English Tourist Board, Sir Mark Henig, who may be known to hon. Members on the Government side. He has a fine record in local government and has been an excellent Chairman of the English Tourist Board for many years.
Sir Mark Henig has stressed on more than one occasion the vital importance of maintaining the unparalleled collection of ancient buildings and homes which we have in Britain. He does not wish to see them preserved simply as stately homes. He has found from the reports he receives from visitors and tourists that the stately home is most effective when it is preserved in its original setting so far as possible, perhaps with an attached village or farm or some land around it, so that something of its ancient splendour and setting is preserved.
Since he has to deal with money, the Minister has to be a practical man. I put it to him that it is a good bargain to do the best we can to preserve our wonderful heritage, not only because it is a splendid national heritage enjoyed by many millions of people but also because it represents good business in 1107 encouraging tourists to come to Britain, where they can see a selection of homes and stately buildings unequalled anywhere else in the world.
I urge the Minister, therefore, to do his best to help us as much as he can, not only because he will be helping to keep and maintain the wonderful heritage which we possess but also because he will thereby help to swell our coffers with much-needed money from tourists who come to Britain.
Only yesterday, I think, the figures were announced showing that tourism to Britain this year is running at the highest level ever. But tourists will not come here unless they have something to see, and Sir Mark Henig has frequently emphasised—he must know from his vast experience—that what the tourist wants to see first and most often, wherever he is in the country, is our ancient stately homes and buildings, well preserved in their natural setting.
§ Mr. Robert SheldonI entirely support all that has been said about the need to preserve our heritage. We are fortunate in having available to us in constant display the fine buildings we possess throughout the country. We take great pride in them, and we must do all we can to preserve them. I entirely endorse what the hon. Member for Harborough (Mr. Farr) said about our unequalled possessions.
The comments of the hon. Member for Harborough and of his hon. Friend the Member for Staffordshire, South-West (Mr. Cannock), as well as those put to me by a number of my hon. Friends, expressed the reasons which led us to try to see how we might provide arrangements to assist the preservation of these buildings, but obviously there are problems. If we were not to get it right, there would be opportunity here not so much to held preserve the buildings and houses in which we have such a special interest but to help individuals who might take advantage of loose arrangements and lax legislation. It has, therefore, been necessary—I am sure that this is common ground—to try to get the legislation right first time so that we could have the advantages of the one without the disadvantages of the other.
The amendments deal with maintenance funds and would provide for new schemes 1108 for maintenance funds, the main intention of such schemes being to enable sums to be set aside for maintenance and to have relief from capital transfer tax. At the same time, the withdrawal of funds in certain eventualities would be allowed. I understand the arguments that can be made in support of the proposition, but that is our problem.
2.0 a.m.
We set out to provide arrangements which such schemes were irrecoverable, which would mean that money was clearly set aside for those purposes, and under which tax arrangements could be made. But we are dealing with complex matters. Although we have at heart the points which have been made, it would be difficult to ensure, if we relaxed the arrangements, that the person who provided the money would be able to get possession of those funds and enjoy the considerable tax advantage that the funds receive while in the maintenance fund.
A number of the amendments deal with this issue in one way or another. One of them allows the settlor to take the capital out of the maintenance fund after three years and allows the beneficiaries to take money out subject to capital transfer tax. But even that does not take into consideration all the advantages during the long period which could be involved. The multiplying effect of inflation must be taken into account. The advantage of not having to pay tax during those years is enhanced by the increase in value caused by inflation. There could, therefore, be the double advantage of freedom from tax and freedom from increases in taxation arising from inflation over a long period of time.
I do not say that in a discouraging spirit to the idea behind the proposal, but I want to show that the difficulties are compounded by the complexity of the legislation and the various ways in which avoidance can be indulged. It is difficult to set in train the full assessment of where it might lead. The amount of tax that is charged on an eventual sale could be less than the full amount enjoyed by the owner while the property remained in the fund.
Those are the problems, but we have demonstrated our belief in the general principle of trying to assist by keeping as open a mind as possible about the 1109 way in which we can provide assistance. We shall continue that attitude.
§ Mr. CormackI accept the sincerity of the Minister in what he is trying to say, but does he accept that bodies such as the National Trust, the Society for the Protection of Ancient Buildings, the Georgian Group and the Victorian Society do not want to assist people to evade their fiscal responsibilities? They are worried that the clause does not go far enough because it excludes some worthy cases and individuals. Will the Minister keep the matter under review, if only because of the prompting of those organisations?
§ Mr. SheldonI am always glad to keep any aspect of the tax system under review. Even if we met all the requirements of hon. Members, there would still be problems over the national heritage. I am prepared to look at all angles from time to time.
As for the National Trust, Amendment No. 147 deals with the problem that I see of the return to the settlor or his family, perhaps after 80 years, of some part of the funds. This comes into the category of the problems I discussed earlier.
§ Mr. Robert CookeI thank the Minister for what he has said, as far as it went. As he will realise, it did not go all that far. The hon. Gentleman approached the whole subject somewhat apprehensively. We all do, and we all sympathise with him.
At 2 o'clock in the morning I do not propose to try to answer in detail all the points that the hon. Gentleman put. Our amendments were designed, if not as talking points at such a late hour, as thinking points for the Government and ourselves. This is a continuing process.
I share the view expressed by all the national amenity societies and other bodies which have given time to the subject that the Government's effort so far will not produce the results we all seek, simply because they have drawn the provision so tightly that very few people, and therefore very few heritage bodies, are likely to benefit from it.
Not all magnificent properties belong to rich people. But there are still some people to whom it might be attractive to say goodbye for ever to a large slice 1110 of an estate or money, in exchange for the capital transfer tax relief and capital gains tax relief that the Government are giving if people put the money into the kind of settlement outlined in Clause 78. But the Government will realise that there are no income tax advantages—indeed, there are considerable disadvantages—when the money is in the fund.
The Minister wrote me a rather confusing letter in which he made clear that in certain circumstances if a fund was accumulated—and the Government specifically talk about accumulations—the money could be taxed at 98 per cent. in the year in which it was spent. It is not a very attractive maintenance fund proposal if one must say goodbye to control of the capital and then be in a situation unlike that of a charity. Some educational charities were set up to help support a particular property, and there all the income was tax-free and could be spent on the property.
In the view of many experts, the Government have not got the position with regard to the income from the funds right. The Minister's letter seemed to confirm that. There will be precious little income coming out of the funds into the heritage property.
I should like to make one aside about the hon. Gentleman's words about tax avoidance. We do not want to set up anything that could be used as a gross abuse, enabling taxpayers to avoid paying tax and divert to their personal purposes money that should be paid in tax. But it would be different if the system eventually settled upon resulted in people being able to spend large sums on the heritage property and not their personal enjoyment, even if there was excessive expenditure. One can envisage an estate where all the decayed trees were replanted and all the fences made good, and where there were great improvements to the landscape. The public would be getting a good deal.
We cannot pursue this matter endlessly tonight, but I believe that we have all benefited from the series of debates on the financial problems of the national heritage. The Government have acknowledged that grave problems exist, and they do not claim yet to have found the answers. We look forward to working with them in the months ahead. We seek 1111 to preserve and enhance an ever more accessible living and lively heritage of landscape, buildings and works of art. We intend to halt the decay, destruction and dispersal caused by the threat of capital taxation. The uniquely British relationship between private owners and public institutions must not be destroyed. We aim to restore confidence and provide a settled future for the heritage.
§ Mr. David HowellI think we all appreciate both the good intentions behind Clause 78 and the difficulties that the Financial Secretary seeks to overcome as he weaves his way through all the rival pressures upon him in trying to meet the needs of the overall situation. However, as we come to the end of the debates on this aspect of capital transfer tax, this part of the Bill and the whole of the Bill, it would be wrong not to say that, despite the efforts of the Government and despite the new clause, there is today a deep sense of foreboding among those struggling to maintain and keep open to the public the great historic houses and parks of the kingdom.
It would be entirely illusory to imagine that the Government have now done all that is necessary to ensure that the fabric of these houses does not crumble and that the parks remain well maintained for the years ahead. On the contrary, the threat is there and growing all the time. It obviously grows the faster in a country where prosperity is not growing and where the burden of taxation is increasing. These factors are part of the millstones that grind down upon the heritage. They are growing problems.
This is not merely a matter of watching the situation to see how it goes. We must try to seek ways of protecting our historic houses from the growing threats that face them within the limits of public policy, and while this Government are in power, within present priorities and prejudices in fiscal taxation. Whether that should be done by amendments to the clause, making it a little less tightly drawn, despite all the problems of not wanting to create any loopholes, which we all understand, or whether it should be done by considering the treatment of income tax that is available to the historic houses which are kept open to the public, which are fully accessible to the public 1112 and which have to be run in the sense of major businesses, with sometimes tens of thousands of people visiting them as major tourist attractions, I do not know, but in one way or another we must ensure that more is done.
It is not enough to say that the clause will keep things all right for the time being and that a watch will be kept to see how matters develop. The situation is more urgent and worrying than that. I think that hon. Members on both sides of the House and from all parts of the political spectrum who treasure our great houses, parks and other aspects of the heritage must continue to think constructively and positively if we are to preserve what we value.
§ 2.15 a.m.
§ Mr. CormackWith the leave of the House, may I say that it is obvious that the Minister shares our interest and concern in these matters. I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.