ANNUAL PAYMENTS FOR NON-TAXABLE CONSIDERATION (Hansard, 25 July 1977)

§ Mr. Denzil Davies
I beg to move Amendment No. 101, in page 35, line 33, leave out from 'to' to end of line 40 and insert—

'(a) any payment which in the hands of the recipient is income falling within section 457(1)(a) or (c) or (2) of the Taxes Act (partnership agreements, transfers of businesses and maintenance agreements);

(b) any payment made to an individual under a liability incurred in consideration of his surrendering, assigning or releasing an interest in settled property to or in favour of a person having a subsequent interest;

(c) any annuity granted in the ordinary course of a business of granting annuities; or

(d) any annuity charged on an interest in settled property and granted at any time before 30th March 1977 by an individual to a company whose business at that time consisted wholly or mainly in the acquisition of interests in settled property or which was at that time carrying on life assurance business in the United Kingdom.'

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

§ Mr. Denzil Davies
This amendment redrafts subsection (3) of the clause and embodies further exceptions to the clause that in Committee I undertook to consider.
The amendment deals with a number of amendments tabled by the hon. and learned Member for Dover and Deal (Mr. 211 Rees)—namely, Amendments Nos. 355 and 396. Paragraph (b) of the amendment should meet the substance of the points made in Committee by the hon. and learned Gentleman, at least on this part of the clause.

§ Mr. John Farr (Harborough)
I am grateful to the Minister. From my reading of Amendment No. 101 he appears to have covered the provision that I sought to make in Amendment No. 64. It also appears that Amendment No. 101 meets all he points made in Committee on 21st June. I am grateful to my hon. Friend the Member for Horsham and Crawley (Mr. Hordern), who dealt with these issues in Committee. It appears that paragraph (d) of Amendment No. 101 and especially its last three lines meet the provision in my Amendment No. 63.

§ Mr. Peter Rees
I also rise to express my appreciation that the Minister has met most of the points made in Committee. With your permission, Mr. Speaker, I should like to refer to two amendments. The first is Amendment No. 65, in page 36, line 2, to leave out from '1977' to the end of line 4 and to insert: 'or to any payment made after that date under a liability incurred for consideration in money or money's worth before that date'. The second Amendment is No. 66, in page 36, line 2, leave out from '1977' to the end of line 4. If I am permitted to speak to them now I hope that I shall be able to move them formally later.

§ Mr. Speaker
That is music to my ears.

§ Mr. Rees
I want to speak to these amendments because the Minister has been so forthcoming. I shall not say "unsually forthcoming" because he usually tries to meet points put to him. I am glad to see that the Chief Secretary nods his head.
Amendment No. 101 was put down on the Order Paper at a late stage. I have not been able to consult a wide range of interests but it meets many points raised earlier. I am therefore sorry that the Minister did not go the whole way and accept Amendments Nos. 65 and 66.
As I pointed out in Committee, there were to my knowledge a range—but not a wide range—of transactions entered into long before we began to consider the Finance Bill. Where a person has 212 entered into an arrangement in good faith on the basis of the law then in force, it has not been thought right to prejudice him by a change in the law. But such people will now be caught by Clause 42.
The Minister of State will say that there is no real retrospection because no taxpayer can guarantee that the law will remain as it is indefinitely. But up to now Governments have recognised that it is undesirable to affect the fiscal consequences of transactions entered into before a Finance Bill is passed. An instance is the alteration of tax relief for deeds of covenant. Annual payments made under such deeds were deprived of relief but not if made under deeds effected before the Finance Act in question. Relief on interest payments was phased out by varying degrees under the Finance Bills of 1965 and of the summer of 1974.
I hope, therefore, that the Minister of State, who has been so forthcoming about individual cases put to him by my hon. Friends and myself, will feel able to go the whole distance and recognise that there is an important principle at stake. Where a person has ordered his affairs on the basis of the law as it stands, his arrangements should be left as they are for a reasonable period so that he can if need be alter those arrangements with the approval of the other party to the transaction. I hope that the Minister of State will go further than he has gone.

§ Mr. Denzil Davies
Perhaps I may speak briefly to Amendment No. 65 as the hon. and learned Member for Dover and Deal (Mr. Rees) has raised the point. I think that his fears arc misplaced to a considerable extent. Subsection (3) of Clause 42 does not apply where the annuities are granted in the ordinary course of the business of granting annuities. That subsection is being amended by Amendment No. 101. We are advised that cases of the tax avoidance which led to this clause are not carried out by companies and firms that carry on the normal business of granting annuities, and that the let-out in subsection (3), as amended, would cover the kind of case that the hon. and learned Gentleman has in mind, because we are concerned here merely with artificial transactions which, as I have said, are 213 not carried out by companies or firms carrying on the ordinary business of granting annuities.

§ Mr. Peter Rees
I see that the Minister is trying to grasp the point, but I am afraid that even Amendment No. 101 will not cover the case I have in mind. I did not have in mind transactions necessarily entered into by companies whose business it is to grant annuities. In the course of professional practice, I have come across a person who has purchased a house not in consideration of a lump sum but by a covenanted series of annual payments. This was done many years ago. For all I know, the annuity in that case may have run out. If I have encountered one such case, there, must be many more.
In those days, it was regarded as an acceptable form of transaction. It would not be covered by paragraph (c) of Amendment No. 101, as it was not trans. acted in the ordinary course of business but through, for example, a person's occupation. I hope that the Minister will accept that such a thing should be allowed, not, of course, for future such transactions but certainly where these transactions have peen entered into in the past.
I know that Treasury Ministers are prone to find technical defects in amendments moved by Back Benchers, and if the Minister of State is fortunate enough still to be in his post by the next Finance Bill, I hope that he will be able to meet my point, which I have put with moderation and restraint.

§ Mr. Speaker
Does the hon. and learned Member for Dover and Deal (Mr. Rees) wish to divide the House on Amendment No. 65?

§ Mr. Peter Rees
If you will permit me to move it formally, Mr. Speaker, if only to give the Minister of State an opportunity to reply to my last point—

§ Mr. Speaker
Order. The Minister of State cannot do so now. He has lost his 214 chance. Amendment No. 65 was discussed earlier at the request of the hon. and learned Member for Dover and Deal. It must be put formally now.