HC Deb 15 July 1976 vol 915 cc1090-5

Amendment made: No. 110, in page 138, line 25, leave out from '1976' to second 'the' in line 26.—[Mr. Robert Sheldon.]

Mr. Speaker

The next amendment is No. 275.

Mr. Patrick Cormack (Staffordshire, South-West)

On a point of order, Mr. Speaker. In view of the resounding vote of no confidence just returned by the electors of Thurrock, do you think that the Leader of the House could be invited to make a statement to review his preposterous announcement this afternoon?

Mr. Kinnock

Further to that point of order, Mr. Speaker. I was about to ask your guidance on whether a newly-elected Member of the House has to wait for any considerable time before taking her seat, since Dr. Oonagh McDonald, who will be a notable addition to the House for many reasons, secured a majority of 4,839 votes in the by-election at Thurrock, when there was the most enormous slip in the Tory vote and the National Front managed to secure a fair chunk of those who traditionally vote Conservative.

Mr. Fairbairn rose—

Mr. Speaker

Order. I think that have been fair. We do not want Scotland as well.

Mr. Nicholas Winterton (Macclesfield rose—

Mr. Fairbairn rose—

Mr. Speaker

Very well. I am sure that it will be out of order.

Mr. Fairbairn

Since Scotland must have a little say in these matters, may I say that I am impressed that the hon. Member for Bedwellty (Mr. Kinnock) should use the word "slip" in these matters with regard to the Tory vote since it slipped up by about 4,000? Is that what the hon. Member means by a "slip"? Is it right that we should use words in this ambiguous way?

Mr. Speaker

We must get back to taxation.

Mr. Nicholas Winterton

On another point of order, Mr. Speaker. I regret to say that I distinctly heard a comment from the hon. Member for Birmingham, Perry Barr (Mr. Rooker) to the effect that I got 3,500 votes. He implied that I was a member of the National Front. I am not a member of the National Front. There is no foundation in the hon. Member's remark, and I hope that you will ask him to withdraw that insult.

Mr. Speaker

We have had a good interlude. I am sure no one would suggest that the hon. Member for Macclesfield (Mr. Winterton) was a member of the National Front. I would not like anyone to suggest that I was a member. Did the hon. Member for Birmingham, Perry Barr (Mr. Rooker) make that suggestion?

Mr. J. W. Rooker (Birmingham, Perry Barr)

Further to that point of order, Mr. Speaker. The words "National Front" have not passed my lips in this Chamber.

Mr. Speaker

We can now get back to taxation.

Mr. David Howell

I beg to move Amendment No. 275, in page 138, line 30, leave out 'as a value on which no tax is chargeable' and insert 'after deduction of any capital gains tax payable in connection with the same transaction or any related transaction'. As you say, Mr. Speaker, that was a nice interlude. Presumably the new lady Member will be sitting by the guillotine.

This amendment deals with the capital transfer tax, which was part of the social contract of 1974, which helped us to a 27 per cent. inflation rate. It cannot, therefore, be seen as a great triumph as a tax. It contains many anomalies and unfairnesses as well as posing a threat to jobs. One of the most serious features of the tax, as we pointed out all along, is the interaction of capital gains tax and capital transfer tax.

When we discussed this matter in Committee of the whole House, the Chief Secretary said: I accept that there is a serious problem as regards the combined burden in some instances when capital gains tax and capital transfer tax operate together …. Under estate duty, capital gains tax never worked in conjunction with estate duty, whereas in the case of a lifetime transfer capital gains tax and capital transfer tax work together. I want to consider the whole of that, without commitment, but I promise that I shall do that. I shall consider also the further views of the Committee when we go upstairs."—[Official Report, 17th May 1976; Vol. 911, c. 1135–38.] We want to know what the right hon. Gentleman intends to do.

1.30 a.m.

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

The hon. Member for Guildford (Mr. Howell) has asked me what my right hon. Friend the Chief Secretary is doing. My right hon. Friend said that he would like to consider, without commitment, the difficulties that can arise in certain circumstances because of the interaction of capital transfer tax and capital gains tax. The Government are doing this. There are a number of difficulties, and a number of injustices could be caused by giving this kind of relief. But I can repeat, without any commitment, that we are looking at this and considering the problems that arise. I cannot say more than that, but we recognise that in some cases there could be a problem and injustice.

Mr. Graham Page

We have waited a year for all these amendments to the capital transfer tax. Are we to wait another year before clearing up this particularly difficult position, where the two taxes are interacting one on the other? We are left in grave doubt as to how for 12 months this is to operate. We cannot correct it at this stage in the Bill without the Government bringing forward an amendment. The Minister has left us in a very difficult position, having to wait another 12 months for the Finance Bill next year for further corrections to the capital transfer tax provisions inserted by the Government last year.

Amendment negatived.

Amendments made: No. 112, in page 138, line 34, after '4', insert '4A'.

No. 112A, in page 138, line 37, leave out from 'company' to 'which' in line 38.

No. 116, in page 139, line 34, leave out from 'the' to end of line 35 and insert business of the company is to continue to be carried on after a reconstruction or amalgamation and the reconstruction or amalgamation either is the purpose of the winding-up or liquidation or takes place not later than one year after the transfer of values'.—[Mr. Denzil Davies.]

Amendment proposed: No. 117, in page 140, line 25, at end insert— '4A.—(1) Where—

  1. (a) the whole or part of the value transferred by a transfer of value (in this paragraph referred to as the earlier transfer) was eligible for relief under this Schedule (or would have been so eligible if such relief had been capable of being given in respect of transfers of value made at that time); and
  2. (b) the whole or part of the property which, in relation to the earlier transfer, was relevant business property became, through the earlier transfer, the property of the person or of the spouse of the person who is the transferor in relation to a subsequent transfer of value; and
  3. (c) that property or part, or any property directly or indirectly replacing it would (apart from paragraph 4 above) have been relevant business property in relation to the subsequent transfer of value; and
  4. (d) either the earlier transfer was, or the subsequent transfer of value is, a transfer made on the death of the transferor;
the property which would have been relevant business property but for paragraph 4 above shall be relevant business property notwithstanding that paragraph. (2) Where the property which, by virtue of sub-paragraph (1) above, is relevant business property replaced the property or part referred to in paragraph (c) of that sub-paragraph, relief under this Schedule shall not exceed what it would have been had the replacement or any one or more of the replacements not been made, but paragraph 4(3) above shall apply with the necessary modifications for the purposes of this sub-paragraph. (3) Where, under the earlier transfer, the amount of the value transferred which was attributable to the property or part referred to in sub-paragraph (1)(c) above was part only of its value, a like part only of the value which (apart from this sub-paragraph) would fall to be reduced under this Schedule by virtue of thise paragraph shall be so reduce.'.—[Mr. Denzil Davies.]

Mr. Graham Page

As Amendment No. 240 has not been moved, and the Chancellor of the Exchequer's amendment is now being moved by the Minister, will he explain it?

Mr. Denzil Davies

I am happy to give the right hon. Gentleman an explanation of the amendment. It was my intention to do so all along.

Amendment No. 117 substantially mitigates one of the conditions for the capital transfer tax business relief. Its broad effect is that, where a transferor acquired otherwise than by purchase the property being transferred, the two-year minimum period of ownership condition for the relief, in paragraph 4 of Schedule 10, may be set aside.

In more detail, business relief will be available on a transfer of business property where the transferor has not owned the property being transferred for two years before the transfer, provided that he or his spouse acquired the property on a transfer in respect of which business relief was due, and that either the earlier transfer or the transfer in question took place on death. It follows an undertaking given by my right hon. Friend the Chief Secretary in Committee.

Amendment agreed to.

Amendments made: No. 118, in page 141, line 29, at end insert: 'but in a case where paragraph 4A above applies this condition shall be treated as satisfied if the assets (or it and the asset or asets replaced by it) was or were so used throughout the period between the earlier and the subsequent transfer mentioned in that paragraph (or throughout the part of that period during which it or they were owned by the transferor or the transferor's spouse)'.

No. 119, in page 142, line 14, after 'property', insert: 'or would be so reduced but for paragraph 1(2A) thereof'.

No. 120, in page 142, line 15, after 'is', insert 'or would be so'.—[Mr. Denzil Davies.]

Amendment proposed: No. 121, in page 142, line 27, leave out from beginning to end of line 32.—[Mr. Denzil Davies.]

Mr. Graham Page

The amendment leaves out a paragraph headed "Claims for relief". May I ask the Minister to confirm that if that paragraph is left out no claim will then be necessary and that the relief will be given without the taxpayer having to claim benefit?

Mr. Denzil Davies

That amendment is consequential on Amendment No. 110, which was the main amendment giving effect to what the right hon. Gentleman has just said.

Amendment agreed to.

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