RELIEF FOR WOODLANDS (Hansard, 25 July 1977)

§ Mr. Peter Rees
I beg to move Amendment No. 126, in page 37, line 28, at end insert— 'and for paragraph 3 of the said Schedule 9 to the Finance Act 1975 (basis and rate of tax chargeable on disposal of trees and underwood) the following paragraph shall be substituted:— 3.—(1) Where the value of any trees or underwood has been left out of account in determining the value transferred on the death of any person and tax is chargeable under paragraph 2 above on a disposal of the trees or underwood, it shall be charged on the following amount (hereinafter called 'the taxable amount'), namely—

(a) if the disposal is a sale for full consideration in money or money's worth, on the net proceeds of the sale; and

(b) in any other case, on the net value at the time of the disposal, of the trees or underwood.

(2) The amount of tax chargeable shall be ascertained by multiplying the taxable amount by the relevant factor provided that in no case shall the tax be charged at a rate or rates greater than the rate or rates 217 at which tax would have been chargeable on the death if the taxable amount, and any other amount on which tax was previously chargeable under paragraph 2 above in relation to the death, had been included in the value transferred on death and the taxable amount on which the tax is chargeable had formed the highest part of that value. (3) The relevant factor shall be ascertained by dividing the deferred tax by the deferred value. For the purposes of this sub-para-graph—

'the deferred value' shall be the value, at the date of the death, of the timber or underwood left out of account in calculating the value transferred on the death;

'the deferred tax' shall be the tax which would have been chargeable on that death if the deferred value (reduced by the amount of any relief under Schedule 10 to of the Finance Act 1976) and the deferred value (similarly reduced) of any other timber or underwood in respect of which tax was previously chargeable under paragraph 2 above had been included in the value transferred on death and the deferred value (so reduced) of the timber and under-wood in respect of which the tax is chargeable had formed the highest part of that value."'.

I propose to move this amendment not formally but succinctly. The principles of it were canvassed, although a little inadequately, by myself and others in the Standing Committee.
This is an amendment of some technicality and I shall not go into it in detail but I shall merely summarise its effects. It is designed to ensure that the rate of capital transfer tax exacted on trees and woodland by reference to a death shall be fixed by reference to the death and not by reference to events that may occur thereafter.
I appreciate that the Government may think me a little churlish for moving the amendment. I detected a slight reservation in their approach to a similar amendment in Committee. No doubt they feel that they have done more than justice to forest owners and those who plant trees by leaving undisturbed the existing fiscal arrangements for income tax and by being a little more liberal in the grants that they propose.
I declare my interest again. I own a small area of woodland in my native hills where I plant trees, mostly conifers. A person is not generally actuated or encouraged to plant trees by the scale of the grants. They may ease the immediate fiscal burden, which is, as all hon. Members will realise, fairly considerable. The immediate return on planting is 218 negligible. Some people may make a modest living from planting Christmas trees, but I doubt it. The return is in the distant future, not one but two generations on. What looms large in the minds of those who plant trees is not the immediate grant or tax relief—important though they are—but the possibility, if not the probability, that their heirs and descendants will be able to reap something of what they have sown and planted.
We may argue about the reasons, but statistics show that there has been a sharp downturn in planting in the last two or three years. I have heard Treasury Ministers give their explanations and I admit that no firm, dogmatic conclusions can be drawn, but it is at least possible to infer that one of the reasons that people have been discouraged from planting is the possible incidence of capital transfer tax. No grants, however lavish, no income tax relief under Schedule D or even the possibility of a cut under Schedule B will remove that grave damage and uncertainty over forestry.
We need from the Government a recognition that there is a considerable problem that is not met by existing capital transfer tax provisions—not even the relief for business assets. We are talking about a crop that is not reaped within one generation. The Treasury may know of a centenarian who has done that, but most of us, including me, do not expect to reach that age in these gruelling times. I do not expect to see the final cutting of any wood that I have planted, and I suspect that I am not untypical.
These are highly technical matters. No doubt the Minister of State, armed with the devoted researches of Somerset House, will find one or two technical flaws in the amendment. We Back Benchers do our best with our inadequate resources. I shall be satisfied if the Minister of State at least accepts the principle.
The amendment is one of extreme moderation and restraint. I am not asking the Government to accept an amendment that would fix the rate and the quantum by reference to the date of death, but merely the rate. The amendment goes only part of the way and at some other time in some other Bill we shall have to go the whole distance. I have made that point on other Finance Bills and in other debates. But it is a modest half-way 219 house. The concept underlying it is that the rate should be fixed by reference to the situation at the date of the death so that at least the heirs can know roughly what kind of impost they will have to face.

§ Mr. Farr
I should like to support what my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) has said. I hope that he is being a pessimist when he says that he will see felled none of the trees that he has planted. I hope that he will live to a good, ripe, old age and see some return on his money.
I declare an interest inasmuch as on a relatively small scale I engage in planting trees.
That this is a difficult situation for those who try to plant trees on a serious scale can be guaged by some simple figures that are now available. The planting grants are meagre and do not cover planting costs. However, I obtained some illuminating figures showing that a coniferous plantation planted some 15 years ago and doing fairly well is valued at £70 an acre. During the whole of that time there has been no income from the land. Had the land been in agriculture, today it would have been worth 10 times that amount, £700 an acre, and there would have been the annual income from the crops. Those are just plain facts making it perfectly clear that the dice are loaded against those who go in for private forestry. The incentive is not there, but there is an incentive to grub up old forests and marginal land and turn them over to agriculture.
This country imports more than 90 per cent of its timber requirements and a big forestry planting programme is needed. Both Forestry Commission and private 220 work should be expanded. This is not the time to discuss the activities of the Forestry Commission, but, fortunately, the foresight of my hon. and learned Friend has provided those of us who are interested with a chance to put in a word for those who are strugglng to maintain in this country some land covered with trees and to help them, as we can, in this Finance Bill.
I hope that the amendment is accepted. On balance of payments grounds we desparately need as many trees as we can grow. The climate of this country is ideal for growing trees and much marginal land is available. if the financial climate is right, for use by private foresters. All that is wrong and all that is discouraging the private foresters and holding everything back is the financial climate. I hope that the Government will do something about it tonight and will recognise the wisdom of the amendment.

§ Mr. Denzil Davies
The hon. and learned Member for Dover and Deal (Mr. Rees) seeks to change the way in which capital transfer tax applies to forestry. I will not at this late hour go into the details of the assistance which is given to forestry or the tax reliefs available. We have debated this matter before. I do not accept that there are grave disincentives to planning. The Government assist forestry in a number of ways, and this assistance is generally recognised to be very valuable.
On the capital transfer tax point, the hon. and learned Gentleman wishes the rate of capital transfer tax in relation to timber to be fixed by reference to the value of the timber at the date of death and not by reference to the value of the timber at the date of the sale, so that in fact the capital transfer tax would be unaffected by any increases in the value of the timber between the date of death and the date of sale. This goes against the whole scheme of the legislation, which is that no tax is charged until the timber is sold but then the tax is charged on the basis of the sale proceeds, and that is taken as the top slice of the estate to the deceased person.
There is an inconsistency in what the hon. and learned Gentleman and the hon. Member for Harborough (Mr. Farr) said. On the one hand, they accept, as I understand it, that capital transfer tax 221 should not be charged until the timber is sold, and then they want the charge to apply to the value of the timber at the date of death, and the increase of the value from death to sale to be taken out of account for capital transfer tax purposes. That is inconsistent.
The amendment also seeks to give the business relief again on the value of the timber as at the date of death. I cannot go along with the amendment, but I can say to the hon. and learned Gentleman, without making any commitment, that I am prepared to look, between now and next year's Finance Bill, at the possibility of applying the business relief to the Schedule 9 situation in respect of the sale proceeds—in other words, to consider whether it might not be possible to give business relief to the sale proceeds, as it were, to reduce that value, but not to apply the business relief to the value at the date of death, because that is an inconsistency in relation to the way in which the legislation is framed. But, without commitment, I am prepared to look at the possibility of giving business relief where Schedule 9 relief is now given under the present framework.
I know that that does not go as far as the hon. and learned Gentleman would wish. He said that business relief is not sufficient and that he wants the valuation to be at the date of death and not at the date of sale. I cannot go along with that, but I shall look at the possibility of giving business relief in the Schedule 9 situation in respect of the sale proceeds, not in respect of the value at the date of death.

§ Mr. David Howell
I think that what the Minister of State has said will be of great interest to a number of people, and my hon. Friends must be congratulated on promoting, at this late hour, the opportunity for the Minister of State to say what he has said. Do I understand from the Minister of Stare's undertaking that he will look at the possibility of applying the business relief for capital transfer tax—the 30 per cent. of valuation—to sales of timber at toe point of sale? I appreciate that the Minister is not saying that it would be at the point of death. Will he consider this for next year's Finance Bill—should there be one under the present Government—or to be 222 brought forward at some other opportunity? Will he give us the timing of it? These are very important matters indeed.

§ Mr. Davies
I said that between now and next year's Finance Bill—and these are matters dealt with in the Finance Bill—I will consider it, without commitment, I am not committing myself to making this change. We shall look at it and consider giving the business relief to the sale proceeds in the Schedule 9 situation, but not to change the basis of valuation from a sale basis to valuation at death. I shall consider that, without any commitment, for the purposes of next year's Finance Bill.

§ Mr. Peter Rees
I am grateful to the Minister of State, who has shown a certain flexibility, and I hope—without wishing to take advantage of his generosity—that he will receive representations from the interested parties. I know that they have made representations in the past, and I hope that he will feel that further conversations, if not with him, with his civil servants, may prove helpful.
In the circumstances, I shall not detain the House by pressing the matter to a Division. I beg to ask leave to withdraw the amendment.