INTERACTION OF DEVELOPMENT LAND TAX WITH OTHER TAXES (Hansard, 24 June 1976)

§ Mr. Ian Stewart
I beg to move Amendment No. 81, in page 55, line 26, leave out "section 80 or section 82" and insert sections 80, 81 or 82". I do not wish to repeat the case I made in Committee except to say that in subsection (1) of Clause 34 the provisions of the interaction schedule are stated to apply to certain other taxes for the interaction with development land tax, 1887 and Sections 80 and 82 of the Income and Corporation Taxes Act 1970 are included but not Section 81. We wanted to know the reason why. The Minister explained that this was basically an anti-avoidance provision and that any conceivable transaction which might come under it could hardly be a bona fide one. He undertook to consider it in case genuine cases could be caught.
I move this amendment to give the Minister an opportunity to comment further.

§ Mr. Denzil Davies
We have looked at this again to see whether there is any concrete evidence that innocent transactions can be caught. That was the suggestion made by various bodies, but no concrete evidence has been supplied, and we have not been able to find any innocent situation which would be caught.
Section 81 is a tax avoidance section. It goes further and is more complicated than Sections 80 and 82.
For those reasons, I am afraid that I cannot accept the amendment.

§ Mr. Ian Stewart
We are grateful to the Minister for having looked at it. In the light of what he said and the negative result of his consideration, I beg to ask leave to withdraw the amendment.

§ Mr. Denzil Davies
I beg to move Amendment No. 84, in page 56, line 9, at end insert or a capital distribution as defined in section 51(1) of the Finance Act 1975, made on the occasion of a transaction on which an interest in land is acquired by any person".

§ Mr. Deputy Speaker (Mr. Oscar Murton)
With this we may take the following amendments:

§ Mr. Davies
The amendments are in fulfilment of an undertaking given in Committee that we would provide interaction relief in respect of capital transfer tax on capital distribution out of a settlement. 1888 The amendments fulfil that undertaking and they also cover the point raised by the Opposition in Amendment No. 85, in substance, is covered by Government Amendment No. 84.

§ Mr. Ian Stewart
I welcome the Government's action in responding to the point that we put forward in Committee. We tabled Amendment No. 85 only to prompt the memory of the Government. I know the Government had difficulty in putting down the amendments on time. We welcome the Government's kindness in responding to the point which we raised.

§ Mr. Denzil Davies
I beg to move Amendment No. 86, in page 56, line 9, at end insert: '(3A) If, by virtue of any provision of this Act, liability for development land tax on any realised development value which accrues on a deemed disposal is deferred until a subsequent disposal or other event, then, without prejudice to the operation of section 12(8) of this Act, for the purposes of Schedule 6 to this Act and, in particular, for the purpose of determining whether any chargeable realised development value accrues on that deemed disposal and, if so, the amount of that chargeable realised development value, the liability shall be assumed not to have been deferred.'. This amendment seeks to resolve a possible difficulty in connection with interaction relief where DLT liability on the commencement of a project is deferred and there is a subsequent disposal. In fact the intention has always been to grant a relief and this amendment puts it beyond doubt by clearing up some drafting difficulties.

§ Mr. Ian Stewart
I beg to move Amendment No. 89, in page 56, line 42 at end insert: '(7) Where any adjustment is made in the computation of the profits arising or losses incurred in an accounting period or year of assessment in giving effect to a deduction or other adjustment under this Act, a claim for relief or (as the case may be) for additional 1889 relief under any other provision of the Tax Acts which is made in consequence of that deduction or adjustment shall not be out of time if it is made before the end of the period of two years beginning with the date on which the deduction or adjustment is agreed or otherwise determined, notwithstanding that the time limit otherwise applicable to a claim under that provision has expired'. We also discussed this matter in Committee. We felt the Bill should contain a provision which would permit tax adjustments as a result of a DLT assessment to be made within a period of two years from the time when the DLT assessment was agreed or otherwise determined. The reason is that there could be occasions when such an adjustment would be out of time, but the potential payer of DLT might not reasonably have been able to take advantage of the interaction and offset because he was not fully aware of his liability. That would be likely to take place in the case of a deemed disposal.
It could perhaps be his own deemed disposal of which he was unaware and one would not have too much sympathy in such a case. However, in view of the many areas of considerable doubt in the legislation there are a number of cases where it would not be at all easy to establish whether or not a potential DLT liability was likely to be incurred. A more serious possibility would be where another party triggered off a DLT liability by some action which was not known, or not fully understood, by the taxpayer. One possible example is the case of old leases, many of which are very permissive in their terms. It could be that if a trader was to own the freehold of a property, which had a lease to a tenant, who then changed the use of the property and the owner had sold the freehold and settled his accounts on the basis of no knowledge of the deemed disposal, he might have gone to appeal on his accounts and tax assessment in other areas, but he may subsequently have been caught for a DLT assessment which he might not then be able to take into account if the matter was settled.
It might even be a tied cottage, and if the tenant retained it after the end of his agricultural tenancy it might revert to non-agricultural use. In a case like that it could well be that the freeholder of the property would not actually know 1890 that he was to be liable for DLT. We felt, in order to provide for cases of that kind, that it would be proper for the legislation to include a means of redress for DLT offset if, otherwise, the taxpayer would have been out of time for making his claim.

§ Mr. Denzil Davies
I confess that I have some sympathy with this amendment, but that does not mean that I shall accept it. This is a new and different tax, and the argument I put forward in Committee was that there could be difficulties in giving a different period for claiming relief for one tax compared with another. There may be problems in this legislation in giving an extra two years in this particular case. However, this problem is not likely to arise in the next few months because it is a case of claiming relief and there is some time available. If there are difficulties, and that time is insufficient because of the complexity of the tax, I can give the assurance that we shall seriously consider introducing amending legislation to put the matter right. At the moment we do not think there will be a problem, but if there is, I can give the House that assurance.

§ Mr. Fairbairn
It is terribly clumsy for the Minister to say that he appreciates that we have a valid point and then to say that there will be amending legislation to this major tax after it has taken so many amendments to get it even half right the first time round. Surely there is a better answer than that.

§ Mr. Stewart
I realise, in spite of what my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) has said, that there are considerable difficulties in amending the legislation at this stage. The Government have realised that there may be a problem and I am grateful to the Minister for what he has said. I was hoping that, under the circumstances, he would at least say that the matter could be subject to review and perhaps be put right by other legislation if, on further consideration, that was found necessary. In the light of what he has said, I beg to ask leave to withdraw the amendment.