- (a) is, at the time the interest is paid, used by the borrower as a residence or, if it is paid less than twelve months after the date on which the loan is made, is so used by him within twelve months after that date; or
- (b) is intended at that time to be used in due course as his only or main residence;
§ (2) In the case of a borrower for whom there are two or more properties falling within sub-paragraph (1) above, he may not by virtue of this paragraph claim relief for any period under section 75 of the Finance Act 1972 in respect of more than one of them.836
§ (3) Subject to sub-paragraph (4) below, living accommodation is job-related for a person if it is provided for him by reason of his employment, or for his spouse by reason of hers, in any of the following cases—
- (a) where it is necessary for the proper performance of the duties of the employment that the employee should reside in that accommodation;
- (b) where the accommodation is provided for the better performance of the duties of the employment, and it is one of the kinds of employment in the case of which it is customary for employers to provide living accommodation for employees;
- (c) where, there being a special threat to the employee's security, special security arrangements are in force and the employee resides in the accommodation as part of those arrangements.
§ (4) The living accommodation is not job-related, except in a case where sub-paragraph (3)(c) above applies, if it is provided by a company and the employee is a director of the company or an associated company, unless the conditions of sub-paragraph (5) below are satisfied.
§ (5) Those conditions are that—
- (a) the company of which the employee is a director is one in which he or she has no material interest; and
- (b) either the employment is as a full-time working director or the company is nonprofit making (meaning that neither does it carry on a trade, nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.
§ (6) For the purposes of this paragraph—
- (a) a company is an associated company of another if one of them has control of the other or both are under the control of the same person; and
- (b) the following interpretative provisions of section 72 of the Finance Act 1976, that is to say, subsection (2) ('employment'), subsections (8) to (10) ('director', 'full-time working director' and 'material interest') and subsection (11) ('control', in relation to body corporate) apply as if this paragraph were included in sections 60 to 71 of that Act.
§ (7) Only interest paid on or after 6th April 1977 is eligible for relief by virtue of this paragraph.".
§ Brought up, and read the First time.
§ Mr. Deputy Speaker
With this we may take New Clause 20—Relief for interest 837 —and Amendment No. 14, in Clause 21, page 14, line 5, at end insert—
§ '(2) In paragraph 4(1) of that Schedule, after paragraph (b) there shall be inserted the following additional paragraph—
§ (c) is at the time the interest is paid the only residence of the person by whom it is paid (in this Part of the Schedule referred to as 'the borrower') other than accommodation provided by his employer, and the value of such accommodation is excepted from section 30 of the Finance Act 1977 by virtue of subsection (4) of that section."'.
§ Mr. Sheldon
New Clause 59 gives relief for mortgage interest to those in accommodation provided by the employer, and it applies to those who wish to purchase their own home either for their present use or for their future use.
My hon. Friend the Minister of State gave an undertaking in Standing Committee that he would try to meet some of the points that were raised at that time. What we are now able to do, as a result of the introduction of the tests for representative occupation, is to determine on the basis of those tests the people who are able to claim relief for the mortgage interest payments.
The people with whom we are concerned are those who have residences made available to them by the nature of their employment and who are able to meet these three tests. The first is that the residence is necessary for the proper performance of their duties. The second is that the residence is made available for the performance of their duties in accordance with the general custom in that occupation. The third test is where special security arrangements are made due to the threat upon that person and his security.
These occupiers will qualify to have relief in buying the home they use as a residence at present, or as an only or main residence at some time in the future. The mortgage relief is given for those in representative accommodation, and it has been difficult in the past to find a satisfactory division between the concept of representative accommodation and beneficial accommodation.
What we have done as a result of the inclusion of this new clause in the Bill is to create that division between the two. This not only settles the position as between representative and beneficial 838 occupations but enables us to go further and tackle the problem that we have been unable to arrive at a solution that would allow mortgage relief for such people purchasing their own homes. I think that the new clause has tackled both these problems at the same time in an effective manner which I hope will commend itself to the House.
§ Mr. MacGregor
I very much welcome the new clause and hope that it will commend itself to every hon. Member. It is worth recalling that the problem of people living in job-related accommodation arose because of the changes that the present Government made to the whole question of tax relief and mortgage interest in the Finance Act 1974. Almost immediately after those changes were introduced my attention was drawn by constituents such as vicars and schoolmasters to the fact that suddenly their mortgage tax relief on the homes that they were acquiring as their main residence had been withdrawn.
Since then my right hon. and hon. Friends and I have taken almost every possible opportunity in every Finance Bill debate—I have proposed amendments at every Committee stage—to put this injustice right. A large number of groups were affected, not just those in the Churches. As the Financial Secretary knows, the Churches Main Committee has been lobbying the Chancellor for three years. Among those affected have been service men and very often policemen, schoolteachers, headmasters and so on, and people working in prisons. I am sure that there were many others. All these groups were drawn to my attention. As the Financial Secretary has said, we had a long debate on this subject again in Committee this year and I am glad that we gradually narrowed down the differences between us, and that at last the opportunity has been taken to put this matter right.
I wish to put on record my welcome for this change and to extend my thanks to the Minister of State, who did so much work on the change prior to our debate in Committee this year, and who showed how sympathetic he was to the point that we were making during the debate itself. What has happened also shows the advantages of Committee stages. I have a feeling that unless we had been able to put forward this proposal year after year, it 839 is very unlikely that we should have seen this new clause coming forward this year. Unless this matter had been widely debated, I suspect that the opportunity of adding another new clause to the Bill would not have been taken.
I wish to put three further points to the Financial Secretary. The first is that the new clause is rather longer than we had expected. It is very much longer than any of the amendments that we had previously put forward to try to rectify this problem. Will the Financial Secretary confirm that the new clause covers all the points and all the groups we have discussed in previous debates? In particular, will he confirm the inclusion of schoolmasters living in school accommodation, sometimes, for example, in independent schools, where there may be some dispute about how essential it is to meet all the points in subsection (3)? Will schoolmasters be covered? I believe that the spirit of the new clause is that they should be so covered.
Secondly, I rather regret that the opportunity was not taken to make the new clause retrospective, because these groups have now suffered three years' lack of tax relief. As the Financial Secretary said when discussing the previous new clause, the opportunity is often taken to make these arrangements retrospective. I am fairly certain that there is nothing we can do about that now, but it was a pity that it was not done.
Finally, will the Financial Secretary confirm that all existing mortgages taken out prior to 6th April 1977 will qualify—as I believe they will—and not just new loans, and that it is only interest paid after 6th April 1977 which becomes eligible—in other words that the 6th April limit applies to interest, not mortgage, so that new mortgages and existing mortgages will be covered by the new clause?
I extend my thanks to the 'Treasury Ministers for responding to our fairly persistent pleas and for at last finding a solution to a problem that was causing injustice and unfairness to many worthy groups.
§ 5.45 p.m.
§ Mr. John Farr (Harborough)
I add my thanks to the Treasury Ministers for the fact that New Clause 59 seems almost entirely to have incorporated the provisions that I was seeking to introduce in 840 New Clause 20, which was much shorter and more concise but was not, I believe, so effective.
A good deal of hardship and anguish was caused, not only to clergymen. [Interruption.] As I was saying, there was a good deal of support from many quarters for this proposal, and no doubt we now have support from the Strangers Gallery as well, which is always welcome.
I have a letter here from a vicar in my constituency, who points out that a great deal of difficulty is caused for clergymen who are perhaps nearing retirement age and have no home of their own. He said that it was universally felt among clergymen that it was essential to have a home of their own as some security for their families when the clergyman died or for when they reach retirement age.
I recently visited one of the newest borstals in Britain at Glen Parva in Leicestershire— [Interruption.]
§ Mr. Farr
I was approached by the governor of the borstal who expressed concern on behalf of borstal governors at the situation in which prison officers find themselves, especially senior prison officers. As we know, the Home Office has recently had a policy—which I think is right—of allowing the more junior prison officers and borstal officers to live off the premises so to speak. But no such liberty is permitted to those senior ranks, particularly governors and deputy governors, who have to be there all the time. This was most unfair to them.
When I approached the Treasury, I was told in February that an interdepartmental committee was reviewing this matter. I take it from what the Minister said that New Clause 59 is the outcome of that interdepartmental review. I am sure that the outcome is wholly satisfactory to all those who were greatly concerned about this matter throughout the country.
§ Mr. Stephen Ross (Isle of Wight)
I wish to add my thanks to the Financial Secretary for introducing this new clause. In a letter dated 12th April he gave an undertaking—as the hon. Member for Harborough (Mr. Farr) pointed out—that he was expecting the report of a working party on this subject. I am very 841 glad that he has been able to bring forward this new clause. No doubt he was under pressure in Committee.
It will be a great relief to many people, particularly to police and prison officers, and especially to policemen in constabularies such as Hampshire Constabulary which have had housing schemes that have encouraged policemen in recent years to buy their own homes, and have then arranged to let those homes when the policeman moved elsewhere in the country. Policemen in such constabularies have been suffering severely by losing the mortgage relief on the property that has been let for them by the constabulary. That was another gripe that they had, quite justifiably, and I hope that the new clause will help to restore the Government's stock among the police force. It is at a very low ebb at the moment.
I also welcome the new clause on behalf of prison officers, since I probably have more prison officers in my constituency than any other hon. Member. They, too, have been encouraged to purchase their own homes, and it was a sad blow when the Inland Revenue refused them tax relief on the mortgages of properties which they had so sensibly purchased for their own retirement. I hope that the House will accept the new clause.
§ (4) The living accommodation is not job-related, except i a case where sub-paragraph (3)(c) above applies, if it is provided by a company and the employee is a director of the company or an associated company, unless the conditions of sub-paragraph (5) below are satisfied.
Subsection (5) goes on:
Those conditions are that—
§ Does this represent the usual Socialist crack at directors? If a director of a company must have a nominal shareholding to enable him to be a director, will that prevent him from receiving the benefit of the clause?
§ Dr. Alan Glyn (Windsor and Maidenhead)
I thank the Government for introducing the new clause. I have written to the Minister about a senior Church man who has referred to the tremendous 842 difficulties associated with the work of clergymen who, when they retire, have nowhere to go. The ability to buy a house on mortgage and to get relief on the mortgage during their working lives will be very acceptable to them.
I understand that the clause deals with Service people, the police and schoolteachers and almost anybody else compelled to live in certain accommodation as part of their job. But many other people may fall into the same category. In other words, where they live is part of their contract. Clergymen are compelled to live in vicarages or rectories, or even in the bishop's palace.
I wonder whether people who have existing mortgages will be allowed the relief of the clause or whether it applies only to new mortgages. I understand from the wording that it will apply to existing mortgages. Many people will be extremely grateful for the clause, and particularly clergymen, whose salaries have never been high and who find at the end of their working lives that they have nowhere to go in retirement.
§ Mr. Ian Gow (Eastbourne)
In Standing Committee considerable alarm was expressed by my hon. Friends about the way in which we were creating special privileges for the new and growing elite of people who worked for the State. Therefore, it is particularly gratifying to us that subsection (3)(c) of the new clause, which refers toa special threat to the employee's security",is not confined to people who hold offices under the Crown.
I contrast subsection (3)(c) with the wording of Clause 32(4). I should like the Financial Secretary to justify the sensible wording of the new clause and to explain why it contrasts with the concession in Clause 32, which applies only to holders of offices or employment under the Crown, with a certificate being given by the Secretary of State.
§ Mr. David Howell
This is a welcome clause and the hon. Members who for some time have pressed for this concession to be made, particularly to people in the Church or in prison service—indeed, many other categories are affected—are to be congratulated on what they have done in bringing about the introduction of the new clause.
843 However, before we go overboard in congratulating the Government it should be recorded that the problem arose from the Government's legislation. As with so many concessions for which we have had to press, the difficulty and alarm caused to many people who were never meant to be affected by the legislation was generated because of the clumsiness of that legislation. People who have been worried about their position will now feel secure as a result of the introduction of this relieving clause.
In making good the error the Government have had to resort to some pretty athletic legislative contortions. I have not previously been aware of the concept of "job-related" living accommodation. I do not know whether the Financial Secretary can assure us that it is an established legal concept. We have talked before about representative accommodation. We discussed these issues at great length in Committee on Clause 32, and we shall be discussing them again.
My hon. Friend the Member for Eastbourne (Mr. Gow) has called attention to the similarity, with one or two highly significant differences, between the conditions which an employee in a job-related house must fulfil to qualify for mortgage relief on his or her other home or intended home and the conditions in Clause 32, which allow employees to enjoy residence in accommodation not described as job-related accommodation without being liable to income tax on the value of that accommodation. In due course we shall debate why this extraordinary difference has arisen, although it would be interesting to hear now from the Financial Secretary the reason for this apparent discrepancy.
My hon. Friend the Member for Folkestone and Hythe (Mr. Costain) referred to the question of directors and people with or without a material interest. His suspicions are all to well founded. The new clause, as with Clause 32, appears to be designed to exclude directors.
§ Mr. Costain
As the Government want worker directors to he included on the boards of companies, is it not farcical to put such wording in the clause?
§ Mr. Howell
That is one of the many aspects of the Labour Party's approach which my hon. Friend is right to 844 criticise. There is the feeling among hon. Members opposite, which the Financial Secretary must justify, that directors are rather wicked people and that if there is any danger of their benefiting from a concession, the position must be adjusted to ensure that they do not benefit. That is in line with the Labour Party's attitude, and I share my hon. Friend's contempt for that attitude.
We must welcome the clause. It puts right a wrong. The wrong was created initially by the Government's clumsy legislation. They have had to act to correct it. That means that there will be more complication on the statute book and in our financial legislation and many more difficulties will be created for members of the Inland Revenue who must work out what the legislation means and for people who must consider whether they qualify under the concession. Nevertheless, we must be grateful for small mercies, and in that spirit I welcome the clause.
§ 6.0 p.m.
§ Mr. Robert Sheldon
The hon. Member for Norfolk, South (Mr. MacGregor) welcomed this new clause, as did every succeeding speaker, and he pointed out the advantage of having the Committee stage of the Finance Bill arranged as we now have it and the possibility which it gave those involved in these matters to deal with them in great depth. But that is not the only advantage of the Committee stage. It also has the advantage that some members of the Committee have open minds. Although I do not claim credit for this new clause, because that belongs to my hon. Friend the Minister of State, it shows that these matters are looked at in great depth by Ministers in an attempt to meet arguments which are made in Committee. The tact that we have so many matters to which we return on Report illustrates the difference between the arrangements now and the way that these matters were dealt with under the previous Administration. We now have Ministers who are prepared to change legislation to meet the reasonable pleas of hon. Members on both sides of the Committee and of the House.
§ Mr. MacGregor
The Financial Secretary will realise, of course, that we would not have had many of the problems which have had to be dealt with in 845 the past two or three years if the original measures introduced by this Government during their first year in office had not been introduced at all.
§ Mr. Sheldon
I am sorry that the hon. Member is now limiting his approval of the new clause. For that reason, perhaps I had better not go any further than to thank him for the limited approbation which he is now expressing.
I deal first with the point that the hon. Member for Norfolk, South made concerning schoolmasters. He will understand that schoolmasters are covered by the new clause. However, he also asked whether it covered all the matters raised in previous debates. I am sure he will not expect me to give such a blanket kind of assurance as that. But it meets the main points which have been put forward. It meets the objectives put forward by the hon. Member for Harborough (Mr. Farr) and by the hon. Member for Norfolk, South in his new clause. It meets the same objectives, but there are certain technical consequences which follow from the proposition put forward by those hon. Gentlemen, and this accounts for the length of the clause. All existing mortgages qualify. We arc giving relief on interest payments, and the relief for interest payments is given, irrespective of the date of the mortgage, from the introduction of the new clause.
The hon. Member for Folkestone and Hythe (Mr. Costain) asked about the position of directors with no material interest. This is a matter that we went into at length in Committee, and I am sure that we shall be returning to it on Report. This is the way in which these decisions have been made in the past. To say any more would perhaps be only to regurgitate the many debates that there have been in the past and to anticipate those which will come in the future.
I was glad to hear the argument made by the hon. Member for Windsor and Maidenhead (Dr. Glyn). A number of hon. Members referred to the position of clergymen, and I have no doubt that this category of people are those who most deserve our interest and concern. They have had an especially difficult problem, and I am delighted that we have been able to meet it by this legislation.
846 The hon. Member for Eastbourne (Mr. Gow) asked about the difference between this new clause and what appears in the Bill affecting those with a special threat to their security. He may not have noticed the amendment tabled by my right hon. Friend the Chancellor of the Exchequer, Amendment No. 33. That meets the hon. Gentleman's point and covers the threat to security in the same way in the main body of the Bill as it does in this new clause, and we shall deal with that in due course.
I was sorry to hear that the welcome of the hon. Member for Guildford (Mr. Howell) for the new clause was rather more grudging. The complications are necessary, for the reason that I indicated. The hon. Member asked whether the introduction of the new definition of "job related" had any significance. It is an attempt to meet some of the conditions set down in Clause 32(4)(a), (b) and (c). Any one of these conditions is required to be met. Incidentally, I can assure the hon. Member for Windsor and Maidenhead that this covers the category of person whose contract compels him to reside in designated accommodation. There are other categories, of course, but certainly it meets the narrower point made by the hon. Gentleman.
I note the interest of the hon. Member for the Isle of Wight (Mr. Ross) in prison governors and prison officers. This provision will be welcomed by them, as it will be welcomed more generally.
We have made use of the definition which separates the beneficial occupiers from the representative occupiers. This makes use of the definition for those who are able and who are encouraged to take out mortgages on their homes for their retirements in the way that I indicated.
I welcome the attitude of the House to the new clause, and I look forward to its being accepted.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.