HC Deb 25 July 1977 vol 936 cc186-92
Mr. Nicholas Ridley (Circencester and Tewkesbury)

I beg to move Amendment No. 36, in page 23, line 4, leave out from 'where' to 'living' in line 6.

This amendment, which deals with the treatment of expenses in connection with living accommodation, should perhaps have ben taken with Amendments Nos. 37 and 38. I believe that would make more sense of the suggestion that we put forward.

The position is that, if a person is neither a director nor earning £5,000 a year, any expenses in connection with living accommodation that is provided by his employer are in no way chargeable to tax. A director or a higher paid employee—someone earning more than £5,000 a year—is liable, unless he can go through the gateways that we debated on the last amendment, to pay tax on the full cost of the expenses. However, a director or a higher paid employee who qualifies for any of the loopholes that we have discussed in Clause 32(4) (a), (b) or (c) will find that Clause 33 applies to him. I want to point to the anomalous position that is thereby created. Surely if, due to the nature of his job, somebody is forced to live in a particular house, he should be relieved from having to pay the expenses of the house that he does not then have to keep.

11.15 p.m.

If we are to tax these expenses for some, it seems hard not to tax them for everyone. It would be a fair argument to say that those who have to live in accommodation because of the nature of their employment should not be taxed on the expenses in connection with that employment. But that is not what the law states. It says that certain categories will be taxed more, some will be taxed less and others taxed not at all. It is the discriminatory nature of the legislation to which I object.

The particular set of expenses set out in Clause 33 which will become Section 63(a) of the 1976 Act are fairly onerous but they are not as onerous as the expenses which those who cannot claim Clause 33 benefits will have to pay. I wonder whether it is right that the three categories should apply. The categories that must pay extra tax on expenses under Clause 33 are relatively privileged and yet the expenses on which they will have to pay tax are heavy. Their position is made worse by the Government amendment No. 41.

The expenses of all who live in accommodation provided by their employer should be treated the same. The amendment would achieve that if it were taken with the two other amendments. The amendment is designed to go with the two other amendments.

Mr. Robert Sheldon

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has raised the question of those who earn less than £5,000 a year and who are not directors. He has examined their position in contrast to that of those who are either higher paid or directors. He has shown that they have certain advantages in not having to pay tax on certain benefits received as a result of their employment. That is not an argument that is attractive in any part of the House.

The regulations relating to benefits in kind concern those who are either higher paid or who are directors. The Government are not seeking to extend taxation from such people. The charge to tax applies to salaries above that level. There is no intention to move to a lower threshold. We cannot accept the hon. Member's approach to this peculiar principle of equity to which he aspires.

Mr. Ridley Amendment negatived

I cannot let that remark go without another word. The right hon. Gentleman said "the peculiar principle of equity to which he aspires". Why is the principle of equity peculiar? The right hon. Gentleman is selective in his choice of which equity suits him. That is reprehensible. In a cavalier fashion he said that this clause applies only to directors and the higher paid. He is willing to clobber the directors and higher paid. In equity he should apply the same tax laws to all. I object to the last discriminatory passage in his speech.

Mr. Peter Rees

I beg to move Amendment No. 39, in page 23, line 13, at end insert, 'excess of normal requirements in'.

Mr. Deputy Speaker

With this we may take Government Amendments Nos. 41 and 88 and Amendment No. 42, in page 23, line 20, leave out 'which are normal for domestic occupation'.

Mr. Rees

It is true that, in form or maybe even in substance, Clause 33 is a relieving provision in that it is designed to limit the charge to tax on those who occupy accommodation for which they are not charged tax under Clause 32 in respect of what one might call ancillary matters such as heating, lighting, repairs and the provision of furniture. Speaking entirely for myself, it was only when I read Clause 33 that I appreciated that a whole range of people I had always regarded as exempted from tax in the occupation of their houses—whether they be the Prime Minister, our Ambassador in Washington or the head of some Oxford college—whether through inadvertence or malevolence on the part of the Financial Secretary, are in fact subject to charge to tax.

We had an extensive debate on this issue in Committee upstairs. Hand in hand with the Financial Secretary, we went through the rooms, as I recall it, of our embassy in Paris and attempted to determine what the measure of the charge would be on the unfortunate incumbent of the high office of ambassador. I remained utterly unclear at the end of it what was the scope of the charge.

The right hon. Gentleman seemed to suggest at some point that there would be certain rooms in the house where the furniture would not impose a charge to tax because they were rooms for formal entertainment, but that in the more domestic, more intimate rooms occupied by the ambassador there would be a charge, and it would be limited to one tenth—this will be, small consolation to him—of his emoluments.

Again, it was not clear whether the emoluments which were to be the measure of the relief were monetary emoluments or emoluments couplied with fringe benefits described in Clause 33. The purpose of the amendment is to probe once more, with faint hope perhaps of eliciting a sensible answer from the right hon. Gentleman, exactly what is the scope of Clause 33.

I want perhaps, if I can, now that the right hon. Gentleman has disentangled himself from my hon. Friend the Member for Cirencester arid Tewkesbury (Mr. Ridley), to focus him for the moment on some of the difficulties. Are we to understand, for example, that a person who is in occupation of a house covered by subsection (4) of Clause 32 is to be afforded relief under Clause 33 only, for instance, in respect of furniture which is normal for domestic occupation but that in respect of furniture which is abnormal for domestic occupation he is not?

I understand, for instance, that No. 10 Downing Street has considerable pieces of eighteenth-century English furniture and some remarkable pictures. Is no relief to be afforded to the Prime Minister in respect of that furniture? Are we to understand that the head of an Oxford college who may have some fine pieces of furniture, not of his choice but that of his predecessors or of the college itself, in his wife's bedroom is to get relief under subsection (3) of Clause 33?

The right hon. Gentleman was not entirely helpful in his replies in Committee, and therefore I want to direct his attention back to these considerable problems because unless they are resolved satisfactorily—[Interruption.] I do not know what the aspirations of the hon. Member for Eccles (Mr. Carter-Jones) are. It may be that he does not aspire to be Prime Minister or ambassador in Washington. But if he does he must listen with considerable care to the answer that I hope the Financial Secretary will give us tonight.

Various people are required by statute to occupy particular accommodation. I think that I carry the House with me on this. It would be particularly hard if they were subject to tax without proper relief because, fortunately or unfortunately, their house was furnished with furniture of a certain elegance and distinction.

I think I detect a certain malevolence, even a certain ineptitude, in some of the provisions for which the Financial Secretary has been responsible. It might be that he will pass the responsibility back to his right hon. Friend the Member for Dudley, East (Dr. Gilbert) whom I see lurking a little uncertainly by your Chair, Mr. Deputy Speaker. Perhaps I should not endeavour to draw two Front Bench spokesmen into this debate, although no doubt their contributions would be listened to with fascination and respect. [Interruption.] If the hon. Gentleman is not concerned with the fascinating debate on cherished number plates, he had better treat my intervention with a little more courtesy and and self-restraint than he is prone to do at the moment. Whether it is the Financial Secretary or the right hon. Member for Dudley, East who replies to the debate, I hope that we shall have an informative reply to this amendment.

Mr. Ridley

I want to say a word about Amendment No. 41, which is in the name of the Chancellor of the Exchequer. We pressed hard to have the words "other than structural repairs" defined more accurately, because this provision could be a major burden upon taxpayers. Instead of seeking to limit and define them, the Government have removed those words by this amendment, which will make the burden even greater. Although the Government expressed great sympathy in Committee with our problem, instead of meeting the point they have made things worse, and I should like the Financial Secretary to say why.

The right hon. Gentleman believes that the master of an Oxford college should be charged to tax every time a new roof has to be put on the master's lodgings, or repainting has to be done outside, or if the fellows decide to extend the lodgings to include an extra tutorial room or some matter of that sort. He thinks that that should be regarded as a charge to tax upon the master. This is a most retrograde amendment, and I hope that the Minister will not move it.

Mr. Robert Sheldon

Perhaps I can deal first with Amendment No. 39, which was moved by the hon. and learned Member for Dover and Deal (Mr. Rees).

This amendment to the 1976 Act allows directors or higher-paid employees with excessive expenditure on services—those who are in receipt of very high levels of quality of service—to be assessed at not more than 10 per cent. of their emoluments. The reason is that in a number of Oxford colleges, or even in a caretaker's lodgings, there might be a level of services in excess of those that would normally be required by the person living in that accommodation. Therefore it was felt right that there should be an upper limit and that was fixed at 10 per cent. of pay.

The hon. and learned Gentleman's amendment accepts that, but those with more modest expenditure are to be taxed on the whole of those services. I fail to understand why the amendment has been moved. I can only assume that either there is an error, or there is some explanation that the hon. and learned Gentleman has not given to the House. If he seeks to give a fuller explanation, I shall be happy to receive it.

11.30 p.m.

We are talking about appurtenances that would be normal for domestic occupation. The provision is necessary in order to ensure that those things that are nothing to do with furniture should not be free of tax, otherwise on advantage could be given to some people by claiming that certain fittings, for example, were appurtenances. Our provision limits such services to those that one would normally expect to be treated as services.

The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) was right in saying that Amendment No. 41 does not meet the case that he made in Committee. That point is dealt with in Amendment No. 88 to Schedule 8. We shall be discussing it later. That amendment provides for the benefit to be set out as in Section 32 (1) of the Housing Act 1961 and meets the hon. Gentleman's point. I hope that he will welcome the change.

Mr. Peter Rees

Are we to understand that whether expenditure on lighting, heating or cleaning is normal or abnormal, whether repairs are structural or current and whether the furniture is that in which a normal house would rejoice or that in an embassy or in 10 Downing Street, relief applies to the whole of the expenditure? Are we to understand that whether expenditure is on abnormal domestic outlay or not, it is to be subject to tax?

Mr. Graham Page

On a point of order, Mr. Deputy Speaker. The Financial Secretary said that we should be coming to Amendment No. 88, but I understood that it was being dealt with in this group and the right hon. Gentleman has certainly not explained the amendment.

Mr. Sheldon

I meant to say that Amendment No. 88 would not come up for consideration until Schedule 8 comes before the House. It will not be dealt with immediately. I thought that what I said to the hon. Member for Cirencester and Tewkesbury made it clear that the concession to his arguments had been made. It will be found in Amendment No. 88 to Schedule 8.

We are dealing with matters that are normal for domestic occupation and not items that have nothing to do with such occupation. For example, a car in a garage is not an appurtenance normal for domestic occupation. A fixed amount of 10 per cent. has been provided in relation to normal appurtenances. The example that I gave would not be allowed because there are other purposes to which it could be put apart from accommodation.

Amendment negatived.

Amendments made: No. 41, in page 23, line 17, leave out '(other than structural repairs)'.

No. 46, in page 24, line 1, leave out 'or'.

No. 47, in page 24, line 2, after '(superannuation)', insert: 'or section 227(1) of that Act (retirement annuities)'.—[Mr. Robert Sheldon.]

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