HC Deb 24 June 1976 vol 913 cc1928-40

Amendments made:

No. 194, in page 164, line 13, leave out from 'above' to end of line 18 and insert '(3A) For the purposes of Part I of Schedule 1 to this Act, notice of a project under subparagraph (1) above is an operative notice if, in relation to the project,—

  1. (a) it is the only notice given under that subparagraph, or
  2. (b) it is the first such notice to be given and no subsequent notice differs from that first notice in its specification of the nature and scope of the project or of the land comprised in it.
(3B) If, in relation to a project of material development, more than one notice is given under sub-paragraph (1) above and no such notice is an operative notice for the purposes of that Part, the Board shall, after consulting such persons as appear to them to be appropriate, determine what should be taken to be—
  1. (a) the nature and scope of the project, and
  2. (b) the land comprised in the project, and
  3. (c) the date on which the project is begun, and shall serve notice of their determination on each person who, in relation to that project, gave notice under sub-paragraph (1) above.
 (3C) On an appeal against an assessment to development land tax, the Special Commissioners shall have jurisdiction to review a determination made by the Board under sub-paragraph (3B) above.'.

No. 195, in page 165, line 16, leave out from "above" to end of line 21 and insert— (7A) For the purposes of Part I of Schedule 1 to this Act, notice of the additional development under sub-paragraph (5) above is an operative notice if—

  1. (a) in relation to that development, it is the only notice given under that sub-paragraph or
  2. (b) it is the first such notice to be given and no subsequent notice differs from that first notice in its specification of the nature and scope of the additional development or of the land to which that development relates.
(7B) If in relation to the additional development more than one notice is given under sub-paragraph (5) above and no such notice is an operative notice for the purposes of that Part the Board shall, after consulting such persons as appear to them to be appropriate, determine what should be taken to be—
  1. (a) the nature and scope of the additional development, and
  2. (b) the land to which that development relates,
and shall serve notice of their determination on each person who gave notice of the additional development under sub-paragraph (5) above. (7C) On an appeal against an assessment to development land tax the special Commissioners shall have jurisdiction to review a determination made by the Board under sub-paragraph (7B) above".—[Mr Denzil Davies.]

Mr. Denzil Davies

I beg to move Amendment No. 196, in page 166, line 42, leave out from beginning to end of line 2 on page 167.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

With this we may take Government Amendments Nos. 197 and 198.

Mr. Davies

These amendments are to narrow the scope of paragraph 39 of Schedule 8 by removing the general power given to the Board of Inland Revenue to require information from any person who holds, or appears to it to hold, an interest in land, as to the nature of his interest and the ownership of any other interest in that land. They limit the board's powers to obtaining supplementary information from such persons as appear to hold or to have held an interest in land which has been disposed of and where realised development value has or may have accrued on that disposal. They also limit the documents with which the board may require to be furnished to those in the possession or power of the person to whom the notice is given.

As the Bill was drafted, there was a general amendment in paragraph 39 (1) to enable the Inland Revenue—in practice it would not abuse the power—to acquire information from any person who held an interest in land whether it was likely to have development value or not. These amendments limit that power. But again, in fairness to the House, I should explain that in one smaller respect the amendments widen the scope of the paragraph by permitting inquiries to ascertain whether a deferred liability to DLT has been triggered or an election to pay the tax by instalments has to be terminated or modified. This is necessary and reasonable. The paragraph as originally drafted is defective in this respect.

The main purpose is to remove the general power, but a subsidiary effect of the amendments is that the Inland Revenue is given further power in the very limited field of triggering off deferred liability for the termination of instalments. That is a reasonable extension of the power, but the main purpose is to remove the general powers in paragraph 39 (1).

Mr. Graham Page

I am grateful to the Minister for having tabled this amendment. I hope that it will not unduly extend the power of the Inland Revenue, and certainly I hope that it will not be used oppressively. Once such powers are given, they often mean the thin edge of the wedge because it is then said that they are a precedent for further Finance Bills. They have' a habit of being extended. That is why we objected to the original powers. However, the Minister has met us to some extent and we are grateful.

Amendment agreed to.

Amendments made: Nos. 197, in page 167, line 8, leave out from 'notice' to end of line 10 and insert—

  1. '(a) a statement in writing as to the matters specified in sub-paragraph (2A) below, or
  2. (b) such information and documents which are in his possession or power as may be specified in the notice and as may be required by the Board for the purpose of determining any of the matters specified in sub-paragraph (3) below, or both such a statement and such information and documents.

(2A) The matters about which the Board may by notice require a person to furnish a statement in writing under sub-paragraph (2)(a) above are—

  1. (a) whether he holds an interest in the land specified in the notice from the Board and, if so, the nature of that interest, and
  2. (b) the name and address of any other person known or believed by him to hold an interest in that land.

(3) The matters about which the Board may by notice required a person to furnish information and documents under paragraph (b) sub-paragraph (2) above where it appears to them that there has been such a disposal of an interest in land as is referred to in that sub-paragraph are'.

No. 198, in page 167, line 21, at end add 'and (d) whether any disposal or other event has occurred which might be the occasion of a charge to development land tax by virtue of section 27 of this Act or which might affect the amount or time of payment of any instalment of development land tax—[Mr. Denzil Davies.]

Mr. Graham Page

I beg to move Amendment No. 228, in page 169, line 3, at end insert— '(9) (a) A person shall not commit an offence or be liable to a penalty under this paragraph (other than the payment of the development land tax to which he is finally assessed) if he satisfies the court that in the failure of which he is charged he did not act either fraudulently or negligently; (b) if a person shall be found guilty of an offence or liable to a penalty under this paragraph the maximum penalty shall be one half of the appropriate penalty (otherwise than aforesaid) stated in this paragraph if he satisfies the court that he did not act fraudulently but he is found to have acted negligently'. This is more than a formal amendment or an amendment to the tax procedures, because tucked away in Schedule 8 there are two paragraphs dealing with penalties—and they are severe penalties. The amendment seeks to ameliorate the effect of these provisions. I do not mean that it allows people to escape the tax. The paragraph contains severe penalties fur failing to give notices or to undertake some act, even though it may be a quite innocent failure to do so.

In paragraph 41 of the schedule there is need for proof against a person who fails to give a notice or in some way fails to make a correct statement. In other words, it must be proved that such a person acted fraudulently or negligently. Therefore, that paragraph recognises that there should be some guilty or reckless act in failing to give notices. But in paragraph 40 the failure to give notices attracts severe penalties without the need for proof of fraud or negligence. This involves substantial amounts of money, such as a penalty of £500 or an overriding maximum penalty. If failure continues after the end of six months, there is a substantial fine of £5,000.

As the paragraph stands, a person may become liable for these penalties merely due to innocent error. The Minister may say "How are we to know that this was not a deliberate attempt to provide a wrong notice?" The amendment goes some way to meet that objection by saying that a person can be charged with an offence of this sort. It is then up to him to show that he is acting without fraud or negligence. This is fairly severe on the person charged. It shifts the burden of proof that applies in ordinary criminal charges. In short, it is saying "You are guilty unless you have proved yourself to be innocent"—which is not in accordance with British justice as we know it.

I realise the difficulties, when taking action against a person under these circumstances, in being able to prove fraud or negligence—and perhaps it is justified, if the facts are that the notice has not been given, to say "You have failed to give such notice. You were required statutorily to do so and now you must prove that you did not fail through fraud or negligence." I am sure that all of us who have to fill in tax notices and make returns, and so on, would be horrified if we found that in some case where notice has to be given on some transaction at some specific time, we were suddenly liable to a fine of £500, or even £5,000 if we went on failing to give such notice. As the Bill stands, it is far too severe. There ought to be an escape from it for a person who through no deliberate fraud or culpable negligence fails to give the notice.

8.45 p.m.

Mr. Michael Spicer

This is a major issue. We do not want to start belabouring anything at this late stage, but my right hon. Friend is right. Had we been debating this point at an earlier stage, quite clearly we would have spent time on it. I very much hope that the Minister will respond favourably to this. Over the last three months I and a number of other hon. Members have attended something like 28 sittings of the Committee, and yet even now I cannot claim to understand the details of this Act that is to be, and if I do not do so—with all the reservations that one has about one's ability to comprehend; and I suppose I am not much worse than other normal citizens—I suggest that there will be a mass of people who will not understand this legislation.

One of my hon. Friends tells me that she has been talking to her lawyer on this Bill and that even after some months of study he does not understand it, either. It is an immensely complex Bill, under which people are likely to make mistakes in payment of their tax. One would have thought that at the very least one could have brought in, under this Schedule 8, some kind of safeguard such as that suggested by my right hon. Friend. I do not want to labour the point but it is very important and should be underlined even at this late stage of the business.

As this is the last time that I shall speak on this Bill, and as I appear to be the only Back Bench Member who has served on the Committee left in the Chamber at the moment, I support what my hon. Friend the Member for Hitchin (Mr. Stewart) has said in congratulating the Minister. One does not wish to bestow the kiss of death upon him, and I hope that he will take these words in the best possible spirit. He has fought for his misguided principles with assiduity. It is absolutely right to say, as we have said on many occasions, that in fighting the Bill he has been almost alone against a lot of us. He has shown competence, and we cannot accuse him of not being prepared to answer in depth whatever points we have raised throughout the whole of these proceedings.

The Minister has shown us great courtesy, and although he was unable to find a synonym for the word "canopy" we forgive him. Although there should be no feeling that yet another deal has been done between the two Front Benches, I offer him my congratulations from the Back Benches.

Mr. Denzil Davies

I am grateful to the hon. Gentleman for his very kind words and, indeed, for staying to the bitter end as the only hon. Member who served on the Standing Committee who had stayed throughout these debates.

The right hon. Member for Crosby (Mr. Page) recognises that there is another category somewhere between fraud and negligence, namely, the category of person who persistently ignores his statutory obligations but who may not be fraudulent or negligent in the sense that he forgets but who deliberately has not sent in notices or has failed to fill in his return. It is recognised in income tax legislation as wilful default, possibly. I do not want to put ideas into the right hon. Gentleman's head, but it is that category of person which one has to meet by using such words as failure to give or to comply with a notice". It may not be due to fraud or negligence, but it may be failure due to wilful default in the sense of deliberately ignoring a statutory obligation. In such a case, it is not possible to prove fraud or negligence. That is the problem that the Revenue faces in constructing penalty clauses of this kind.

The penalty will not normally be levied if the failure is remedied before proceedings are instituted. The penalties would not in practice be levied, except in the most blatant case of persistent failure. It would be possible to remedy the failure before proceedings, and in most cases that would be sufficient. If it transpired that there were reasonable grounds for a failure, again the board would have power to mitigate or remit a penalty, and there would be a right of appeal by the defendant to the courts against the amount of a penalty. The defendant could appeal to the courts, just as he can in other fiscal legislation, on the amount of the penalty and also on the question of law.

The amendment would mean that the Revenue would have to prove fraud or negligence in these cases. That would be almost impossible, because it would not be a case of fraud or negligence. Unfortunately, it is necessary to have a phrase like failure to comply with regulations". and "failure" covers more than fraud and negligence.

I am afraid that I cannot accept the right hon. Gentleman's amendment. I recognise that this is an important matter. In practice, however, I am sure that it will turn out, as it has on other fiscal legislation, that only the persistent or deliberate failure is penalised. This is not directed at failure through inadvertence, which does not border on negligence or fraud.

Mr. Graham Page

With respect to the Minister, he is reading into the wording something that is not there. If he had put into this paragraph "wilful default" or "wilful failure", I might not have seen the necessity for tabling the amendment, but, as it stands, it is pure and simple "failure". It is not necessary, in proving the offence, to prove that a failure was wilful. The hon. Gentleman is reading words into the paragraph which are not there, and I fear that there may be very serious cases of miscarriage of justice. The word is just "failure". A person will be charged with this offence and committed on the simple wording of the paragraph, and he will be subject to a severe fine.

It is all very well to say that the board afterwards has power to mitigate the fine in these cases. It is wholly against the principles of justice that an executive body should be able to deal with the matter and set aside a decision of the court in that way.

I wish that the Minister had got the paragraph right to start with, because, if he intends this to apply only to the person who wilfully fails to give notice, he should have put it in the paragraph.

It may be that, at some later stage in some other legislation, the Minister will be able to correct this. I wish that we could put it right tonight. But I am worried that, if the clause remains in its present form, it will be used as a prece- dent in future financial legislation. I can see it coming. We shall then get the sort of case where someone is severely fined just for being a little lax and slack in serving notices.

Amendment negatived.

Mr. Denzil Davies

I beg to move Amendment No. 199, in page 170, leave out lines 26 to 29.

This amendment seeks to reverse the decision of the Committee when the Opposition carried Amendment No. 414. I will not go into the reasons which caused the Opposition amendment to succeed. It might have been the weight of the argument, or other reasons, but it would not be fair to suggest what they might have been.

Unfortunately, though it was accepted in Committee, the Opposition amendment is not acceptable to the Government because it would involve giving reliefs far greater than originally intended in the legislation. They would allow a trader to pay DLT by instalments even though the land disposed of was not currently being used for trading, provided it could be shown that at some time in the past it had been used by someone for some kind of trade. We are concerned that a very wide relief contained in Amendment No. 414, and the wide scope of its provisions, would also lead to schemes of avoidance.

With those magic words perhaps I can ask the House to reverse the Committee's decision because it goes wider than we intended and could create considerable problems of tax avoidance.

Mr. Graham Page

I must protest strongly at the Minister trying to reverse something which he lost on the strength of the argument from the Opposition side of the Committee. He is suggesting that it was not because of the logic or reasoned strength of our argument. He was suggesting that one of his members had got lost in a cabinet—not the Cabinet at No. 10—and was missing from the Committee Room for some good purpose. In fact it was the strength of the argument which carried the amendment, and we are sorry that he should now see fit not to take his defeat graciously but to try to reverse the decision. It was a beneficial amendment for the trade, although not for the Treasury, but that was not what we were aiming at. I am sorry that the hon. Gentleman is now trying to reverse the decision at this stage.

Amendment agreed to.

Amendments made:

No. 200, in page 170, leave out lines 34 to 38.

No. 201, in page 170, line 41, leave out 'paragraph (b) above' and insert 'subsection (1) of that section'.

No. 202, in page 171, line 14, leave out from on 'to' the' in line 16 and insert 'a disposal of an interest in land or on the occurrence of an event to which sub-paragraph (1) of paragraph 43 above applies is payable by instalments by virtue of an election under that sub-paragraph'.

No. 203, in page 171, line 19, leave out from 'due' to end of line 24.

No. 204, in page 171, line 27, leave out 'relevant disposal' and insert 'disposal or, as the case may be, the event referred to in sub-paragraph (1) above'.

No. 205, in page 171, leave out line 31 and insert— '(3) In any case where— (a) the liability referred to in sub-paragraph (1) above arises on the deemed disposal of an interest in land, and'.

No. 206, in page 171, line 39, at end insert— (3A) In any case where—

  1. (a) the liability referred to in sub-paragraph (1) above arises on the occurrence of an event to which sub-paragraph (1) of paragraph 43 above applies, and
  2. (b) the condition in sub-paragraph (3)(c) of that paragraph is fulfilled, the number of yearly or half-yearly instalments shall be such that they all fall due before the expiry of the relevant period referred to in sub-paragraph (3)(c) of that paragraph'.

No. 207, in page 171, line 40, leave out 'relevant disposal is' and insert 'liability referred to in sub-paragraph (1) above arises on'.

No. 208, in page 172, line 1, leave out relevant disposal is a' and insert 'liability referred to in sub-paragraph (1) above arises on the'.

No. 209, in page 172, line 2, leave out 'sub-paragraph (1) above' and insert 'that sub-paragraph'.

No. 210, in page 172, line 18, leave out from 'it' to end of line 23.

No. 211, in page 172, line 25, leave out 'relevant' and insert 'deemed'.

No. 212, in page 172, line 32, leave out from 'date' to end of line 35 and insert: 'and in this sub-paragraph "the review date" means the date referred to in sub-paragraph (5)(d) above or, if there is more than one such date, the first of those dates'.

No. 213, in page 173, leave out lines 9 to 40 and insert— (9) In this Part of this Schedule, "the relevant project", in relation to the deemed disposal of an interest in land, means the project of material development the start of which is the occasion of that disposal'.

No. 214, in page 173, line 45, after first 'of', insert 'an election under'.

No. 215, in page 175, line 23, leave out `relevant disposal is' and insert: 'liability referred to in sub-paragraph (1)(a) above arises on'.

No. 216, in page 175, leave out line 31 and insert— '(3) Where the liability referred to in subparagraph (1)(a) above arises on the occurrence of an event to which paragraph 43(1) above applies and that'.

No. 217, in page 175, leave out line 39 and insert— '(4) Where the liability referred to in subparagraph (1)(a) above arises on the occurrence of an event to which paragraph 43(1) above applies and that'.

No. 218, in page 176, line 26, leave out 'the operative' and insert 'an'.

No. 219, in page 176, line 28, leave out 'the operative' and insert that'.

No. 220, in page 176, line 34, leave out 'relevant disposal' and insert: 'disposal of an interest in land (in this paragraph referred to as "the relevant disposal")'.—[Mr. Denzil Davies.]

9 p.m.

Mr. Denzil Davies

I beg to move Amendment No. 221, in page 180, line 11, leave out from 'under' to 'subparagraph' in line 12 and insert— '(i) sub-paragraph (1) of paragraph 47 above, by virtue of any of sub-paragraphs (2)(a), (3)(a) and (6)(i) of that paragraph, or (ii)'. This amendment is partly to correct a reference in paragraph 50(3) of Schedule 8 consequent on the introduction by amendment in Committee of a new paragraph 47, and partly to extend the operation of paragraph 50(3) which deals with payment by instalments where there would otherwise be hardship. The amendment ensures that the benefit of paragraph 50(3) is available in all the cases dealt with in paragraph 47 involving the granting of a lease and is not confined to only one of those cases. The amendment is a consequential and relieving amendment. The original drafting did not make the matter clear.

Mr. Graham Page

I am grateful to the Minister for making this clarification. Perhaps I might add my congratulations to those which have already been expressed by my hon. Friends. We are sincerely grateful to the Minister. We have thoroughly disagreed with some of his amendments and some of the clauses. One would have thought that that hatred of the Bill might have been passed on to the Minister, but no such thing occurred. We are grateful to him for paying attention to all we have put forward and for doing so graciously in certain cases and meeting our points in so many cases. We congratulate him and are grateful to him.

Mr. Denzil Davies

I thank the right hon. Gentleman for his kind remarks. He has ensured that this Bill has been dealt with adequately and in great detail. I know that we disagree on fundamentals but I am sure that we now have a technically better Bill than we should have had if the right hon. Gentleman had not been leading for the Opposition. As I said in Committee, he picks up one's bad points very quickly, which is unfortunate, but at least he recognises one's good points and that made our Committee deliberations much easier. I am grateful to him.

Amendment agreed to.

Amendments made:

No. 222, in page 180, line 28, at end insert:

"51A.—(1) This paragraph applies where—

  1. (a) as part of the transfer of his business to a company a person disposes of an interest in land to the company, and
  2. (b) on that disposal (in this paragraph referred to as the incorporation disposal') the chargeable person becomes liable for an amount of development land tax (whether in respect of realised development value accruing on that disposal or by virtue of section 27 of this Act), and
  3. (c) the transfer of the business is one where, for the urposes of Part III of the Finance Act 1965 (capital gains tax, paragraph 15 1940 of Schedule 19 to the Finance Act 1969 applies (special rules on transfer of business as a going concern to a company).

(2) Where this paragraph applies, so much of the development land tax referred to on sub-paragraph (1)(b) above as apears to the Board or, on an appeal, to the Commissioners concerned to be just and reasonable shall not become payable until such time as may be determined in accordance with sub-paragraphs (4) to (6) below; and in the following provisions of this paragraph the amount of tax which does not become payable until that time is referred to as "the postponed tax".

(3) In determining under sub-paragraph (2) above the amount of the development land tax referred to in sub-paragraph (1)(b) above which is to be the postponed tax, the Board or, as the case may require, the Commissioners concerned shall have regard to the proportion of the consideration for the transfer of the business referred to in sub-paragraph (1)(a) above which consists of shares.

(4) If at any time within the period of eight years beginning on the date of the incirporation disposal there is a disposal—

  1. (a) of any of the shares comprised in the consideration for the transfer of the business concerned, or
  2. (b) of the interest referred to in sub-paragraph (1)(a) above or of any other interest in land which is derived, directly or indirectly, from that interest,
so much of the postponed tax as may be determined by the Board under sub-paragraph (5) below shall become payable at the time of that disposal.

(5) In making a determinatoon under subparagraph (4) above in relation to a disposal of shares or an interest in land, the Board shall have regard—

  1. (a) to the proportion of the consideration for the transfer of the business or, as the case may be, the proeortion of the value of the interest disosed of; and
  2. (b) in the case of a disposal of an interest in land which is a deemed disposal, to the extent to which liability for development land tax on any realised development value which accrues or might accrue on that deemed disposal is or would be deferred under any provision of this Act.

(6) At the expiry of the period of eight years beginning on the date of the incorporation disposal, there shall become payable so much of the postponed tax as had not previously become payable by virtue of subaragraph (4) above.

(7) In this paragaph 'shares' includes stock.".

No. 223, in page 180, leave out lines 31 and 32.

No. 224, in page 180, line 41, leave out "'the relevant disposal' and".[Mr. Denzil Davies.]

Bill to be read the Third time tomorrow and to be printed. [Bill 178.]