EXEMPTION FOR PROJECTS BEGUN WITHIN TWO YEARS OF ACQUISITION OF LAND (Hansard, 24 June 1976)

§ Mr. Denzil Davies
I beg to move Amendment No. 48, in page 28, line 13, leave out 'two' and insert 'three'.

§ Mr. Speaker
With this we may take the following amendments:

§ Mr. Davies
Amendment No. 48 extends the period within which a project or material development will be exempt from development land tax provided no signicant amount of development value would have been realised had it been begun after the land was acquired. It extends that period from two years to three.
The Opposition Amendment No. 49 would extend the period to five years. No doubt we shall hear from the right hon. Member for Crosby (Mr. Page) whether he considers that our proposal to extend it to three years is a reasonable compromise. We think that we have gone some way towards meeting the points that he raised in a long debate in Committee. We believe that three years 1872 is long enongh for this relief, which is a complete exemption from tax in many cases.

§ Mr. Sainsbury
We are grateful for the Government's response to the point I raised in Committee. It was a rare occasion when we had not only words but real support from the Government side. The right hon. Member for Dartford (Mr. Irving) spoke in favour of our seeking an amendment on this point.
In view of what the Minister has said, we shall not press Amendments Nos. 52 and 53.

§ Mr. Sainsbury
I beg to move Amendment No. 50, in page 28, line 24 after "above" insert an amount shall be significant if it is more than 8 per cent. of the owner's cost of acquisition or such larger amount as appears to the Board or, on an appeal, to the Commissioners concerned to be just and reasonable, and". This amendment is interesting, in that we are trying to introduce a definition of "significant". We had two interesting debates on this point in Committee. I remind the Minister that the Financial Secretary said: I am asked to apply discretion to the collection of taxes. This is extremely dangerous ground indeed."—[Official Report, Standing Committee J, 6th May 1976; col. 959.] We then went on to a debate in which the Minister replied with his usual eloquence, arguing that discretion was needed on every occasion. This is, I submit, an occasion when discretion is not needed, and a firmer definition would be more appropriate.

§ Mr. Denzil Davies
We had a long debate in Committee and I expressed some doubt about the word "significant". We have looked at this again in order to see whether it might be possible to insert a percentage instead of the word "significant". The problem is that 8 per cent. of a small amount is not significant, and 8 per cent. of a large amount may be significant. That is why we are unable to put in a percentage figure. If we did, there would have to be some kind of tapering or de minimis or de maximus relief, to ensure that the relief was not greater than a certain amount.
I give the Committee the assurance that this is not a matter entirely, solely and ultimately within the discretion of 1873 the Board of Inland Revenue. There is a right of appeal, under Clause 18 (2), against any assessment. If the Revenue assess a developer on the basis that the amount is significant, he can appeal against the assessment, and the commissioners can decide whether the amount is significant or not.
It is not a case merely of the discretion of the board. The board has an initial discretion, but there is a right of appeal. I put that on the record and give the House that assurance. The commissioners will then have the difficult task of deciding whether the sum was significant, but at least it will be an independent body, a responsible body, which will decide the matter in the end.
For these reasons I cannot accept the amendment.

§ Mr. Graham Page
If a case goes on appeal to the commissioners, what guidance will they have as to what is meant by "significant"? We have tried to get some certainty into the administration of this clause. If the commissioners were to read what the Minister has just said in order to get some guidance as to what is meant by "significant", they would be misled.
The Minister said that 8 per cent. of a small amount would not be significant, and that 8 per cent. of a large amount may be significant, but surely "significant" is a comparative word. It is not a question whether the amount itself is significant or insignificant, but whether the amount is significant in relation to the transaction, I would not have thought that 8 per cent., however large the amount, would be significant. It would have to be an amount sufficiently large to come within the word "significant".

§ Mr. Denzil Davies
I can at least give the right hon. Gentleman the assurance that I am sure that the Inland Revenue would look at this matter again in order to see whether it can publish or give some kind of guide, but it would not be right for the Inland Revenue to try to bind the hands of the Special Commissioners, who are an independent body. No doubt in presenting its case to the commissioners the Revenue would argue from the point of view of its guide, or from a figure it thought was significant. At the end of the day the commissioners would decide according to all the circumstances.
I shall certainly see whether it is possible for the Inland Revenue to give some kind of guide on the subject, but, as I have indicated, the commissioners may have to decide the matter in the end.

§ Mr. Sainsbury
It sounds as if we shall end up with an extra-statutory direction. Therefore, I am glad that my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) is not here. In view of what the Minister has said, I beg to ask leave to withdraw the amendment.

§ Mr. Sainsbury
I beg to move Amendment No. 54, in line 27, at end insert: '(7) For the purpose of subsection (3) above a person who has entered into a contract, whether conditional or unconditional, to acquire an interest in land shall be treated as being an owner of that interest'. This amendment deals with the question of conditional contracts and the extent to which they create ownership. The subject gave rise to quite a long debate in Committee, in the course of which the Minister, as I think he would agree, became a little confused. He gave a very firm undertaking. He said: I am prepared to consider it on the basis that if it is purely a technical procedural matter, we may be able to do something but if it goes into the substance of the clause I shall not be able to meet them. 1875 I do not think that this amendment goes to the substance of the clause. I remind the Minister of the words of my right hon. Friend the Member for Crosby (Mr. Page), who is an authority on this issue. He said: I am delighted with the Minister's speech, as he disclosed that he had completely misunderstood our amendment. But I am sure that when he does understand it, he will accept it."—[Official Report, Standing Committee J; 6th May 1976, c. 988–92] I hope that the moment of illumination has now been reached, and that the Minister will accept the amendment.

§ Mr. Denzil Davies
There has been no illumination, if that is what the hon. Member for Hove (Mr. Sainsbury) wishes to see descend upon me. I am afraid that there is still a gulf between us, as we have seen in previous debates. I have looked at it again but, as far as I can see, the amendment goes beyond being a technical procedural matter.
The question is whether someone who has not an unconditional interest in land, and whose contract is subject to a condition, should be able to avail himself of what is a kind of clearance procedure, although he might never get planning permission and there might be no development at all.
Development land tax is levied on interest in land, and a conditional contract does not amount to that kind of interest in land until the condition is satisfied. If there is merely a conditional contract, the condition being that planning permission is given, the person concerned does not have the kind of interest in land for the purposes of this legislation which would allow him to ask for a kind of clearance procedure. It is only when he has planning permission and is actively contemplating development that he can properly ask for this particular kind of clearance.
Since we cannot have any meeting of the minds on this matter, I cannot accept the amendment.

§ Mr. Sainsbury
I am sorry that the Minister has not allowed any illumination to fall on him and that there is still a gulf between us. I suspect that this matter will cause problems and that we shall have to return to it in a later Finance Bill.