HC Deb 13 July 1978 vol 953 cc1779-91

5.30 p.m.

Mr. Denzil Davies

I beg to move amendment no. 23, in page 31, line 38, leave out 'In' and insert 'For'.

Mr. Deputy Speaker (Sir Myer Galpern)

With this we may take the following amendments:

Government amendment no. 24, amendment no. 36, in page 32, line 4, after 'years', insert 'or 55 years in the case of a full-time fisherman', and Government amendments nos. 25 to 27.

Mr. Davies

The amendment gives a scaled-down capital gains tax retirement relief where the business has been owned for less than 10 years at the time of disposal. Thus, an appropriate percentage of the maximum relief due by reference to the individual's age at the time of the disposal will be available where the period of ownership of the business falls short of 10 years, provided that the business has been owned for a year or more. The percentage will be 10 per cent. where the period is exactly one year, rising to 100 per cent. for 10 years.

The amendment also provides for the purposes of the scaled-down relief that periods in which the individual has been the proprietor of his business should be aggregated with those in which his family trading company, of which he is a full-time director, carried on the same busi ness. Thus, the amendment brings within section 34 of the Finance Act 1965 the provision for aggregating such periods at present contained separately in paragraph 2(3) of schedule 10 to the Finance Act 1966. Paragraph 2(3) is therefore repealed.

This amendment arises as a result of a new clause tabled in Committee by the hon. Member for Weston-super-Mare (Mr. Wiggin). Since that clause was somewhat restrictive, these amendments go further than that clause and provide what I am sure the House will agree to be a welcome improvement.

Mr. Douglas Henderson (Aberdeenshire, East)

I wish to refer to amendment No. 36, which stands in my name and in the names of my SNP colleagues. The Minister of State did not refer to that amendment in his introductory remarks, but it relates to an occupational group on which I hope the Government will look with some sympathy.

We tabled the amendment in Committee, but unfortunately no SNP Member was selected to serve on that Committee. I understand that the amendment in question was not called. I hope that the Government will be sympathetic on the amendment, because it deals not with people who need periods of service or business aggregated, but with people who have spent their whole lives in the occupation of fishing—a hazardous and dangerous occupation. In the past four years, two fishing boats from my constituency have been lost without trace at sea. There have been similar catastrophes in other constituencies.

The concession that the Government have introduced on capital transfer tax is welcome, but although it is a welcome lift in the rate of concession I wish to emphasise that the cost of building fishing boats has escalated at a much greater rate. Four years ago we used to talk of a fishing boat costing £1,000 a foot. However, in respect of an 80 ft. boat—the characteristic length of boat in my constituency and in most constituencies from which the inshore fleets ply—we are now talking of a figure of between £6,000 and £7,000 a foot. A boat between 80 ft. and 85 ft. now costs about £500,000.

I wish to emphasise the social consequences, because in the Scottish fishing industry, which the amendment seeks to benefit, the boats are not company boats but family boats. It is not a case of a large multinational company quoted on the Stock Exchange having equity in these boats and employing the skippers and crew. This is a case where the funds are generated from within the family and where the responsibility for ownership passes from father to son, as it has for generations.

I fear that one of the unintended consequences of this legislation may be that the fishing industry in Scotland will be fundamentally and radically changed. The only way to generate capital will be by bringing in company money—money which the fishermen do not want because they wish to continue to keep their boats in a family business.

In the Scottish fishing industry there are 1,000 skipper-owners who operate on a shared basis. In other words, the crew who work on the boat share in the profits. This is a socially healthy scheme to operate in this hazardous and dangerous occupation. I fear that, unless some action can be taken, the prospects of the industry continuing in this way will be jeopardised.

My right hon. Friend the Member for Western Isles (Mr. Stewart) was told in a recent parliamentary Answer by the Secretary of State for Scotland that as at December 1974 there were 2,639 boats registered in Scottish ports in the inshore fleet, ranging from boats under 40 ft. to boats up to 80 ft. Therefore, it is not an enormous problem for the Government to take care of in this legislation.

The Scottish Fishermen's Federation pointed out that when it made a submission requesting that the retirement age for inshore fishermen for the purposes of these provisions should be treated as 55 years, the Inland Revenue superannuation fund office earlier this year said that it was prepared to accept retirement annuities with a retirement age of 55 for full-time fishermen. I welcome that decision by the Inland Revenue, which seems to me to be realistic in examining the nature of the work and the problems faced by fishermen. I do not know whether the Minister of State has ever been on a fishing boat. He is looking very pensive.

Mr. Denzil Davies

Yes. I have.

Mr. Henderson

If he has been on a boat, I do not know how far out to sea he went and whether he went out of the harbour. I extend to him and to the Financial Secretary, the Chief Secretary and the Chancellor of the Exchequer, an invitation, here and now, to go aboard a fishing boat in my constituency. I will arrange it on any date that is convenient to them. They will go out on an excellent boat and they will have a pleasant trip at sea. To ensure their safety and to make sure that they will he permitted to return, I shall go with them—otherwise I am afraid I could not guarantee that they would come back.

If the Minister accepts that invitation, he might well have a better appreciation of the situation—and this applies to his Treasury colleagues and the appropriate civil servants.

Mr. J. Enoch Powell (Down, South)

The accommodation on the inshore boats plying out of the hon. Gentleman's constituency must be more lavish than those in the fishery of County Down. If he experiences any overcrowding as a result of his invitation, the Minister and his colleagues will be welcome and will learn a great deal if they will join in a trip on a fishing boat out of Kilkeel, in my constituency. May I add that I associate myself more seriously with the hon. Gentleman's case?

Mr. Henderson

I am grateful for the right hon. Gentleman's support. I do not propose to enter into competition with him over the merits of the boats in our constituencies. He said that the accommodation is limited on these boats, and that is true. Normally they carry a crew of seven or eight. If we were to take with us the Chancellor of the Exchequer, the Chief Secretary, the Financial Secretary, the Minister of State and two or three members of the Civil Service, we would expect—

Mr. Deputy Speaker

I hope that the hon. Gentleman is not including the occupant of the Chair, because I turn seasick very readily.

Mr. Henderson

Naturally, Mr. Deputy Speaker, I shall consult you before extending any such invitation to you, because I realise that you are not responsible for this legislation. If one had to accommodate all those people on a normal boat there would be no room for the crew, and we would expect the Chancellor of the Exchequer, the Financial Secretary and their colleagues to play their part in hauling up the nets, operating the winches, gutting the fish, and undertaking all the other numerous tasks that have to be carried out at sea. If the Ministers underwent that experience, it might concentrate their minds wonderfully on the amendment.

This matter was referred to briefly in Committee and I pay tribute, unusually, to the hon. Member for Edinburgh, Pentlands (Mr. Rifkind), who raised it. The hon. Gentleman was given a most disturbing reply by the Chief Secretary, who made the extraordinary statement that: It would be difficult to define a particular group—for example, fishermen—as I am sure that the hon. Gentleman will accept."—[Official Report, Standing Committee A, 13th June 1978; c. 1164.] I do not know at what hour of the night or morning the Chief Secretary was speaking, but there is surely no difficulty in defining a particular group such as fishermen. They are defined for many purposes under the national insurance legislation and other legislation. This is a case where particular concern should be shown to a clearly understood and defined group.

There are just over 7,500 full-time fishermen in Scotland, of whom about 1,000 are skipper-owners. The Government should look at the amendment seriously for the sake of the industry, which is suffering great troubles. It is inhumane for the Government to expect fishermen to go to sea at the age of 60 or 65, facing all the hazards of their job, and not give them at least the option of the capital transfer tax relief provisions, which would allow them at the age of 55 to pass on to their sons their share in a boat. I know the fishermen in my constituency well. They are a hardy breed, and many would want to carry on, but there are some who, for health, domestic or other reasons, might decide that it was better to call it a day at 55 and allow their sons, many of whom have skippers' tickets, to take over the boats.

Even if the Minister cannot accept the amendment, will he consider the possibility that if there are medical grounds for a skipper's early retirement, he should have the option of obtaining the capital transfer tax relief provisions at the age of 55?

I do not know what sort of reply we shall get from the Minister of State. He gave no indication of his view on the amendment when he spoke earlier, but I hope that he will give a reasoned reply and will say that the Government have considered the matter seriously, and that he will add some lustre to his name in Scotland, if nowhere else, by saying that he will accept the amendment.

Mr. Malcolm Rifkind (Edinburgh, Pentlands)

I have no desire to join the boat trip being thoughtfully organised by the hon. Member for Aberdeenshire, East (Mr. Henderson) for the Treasury Ministers. The hon. Gentleman and the Ministers are in deep water most of the time anyway, and I see no need for the rest of us to join them in that predicament.

I raised the matter in Committee when we considered the general question of entitlement to retirement relief. The hon. Member for Aberdeenshire, East is correct in saying that this is an unusual, perhaps even unique, case. Those working in this industry are expected to retire earlier than the general population and they are entitled to consider earlier retirement because of the nature of their work.

The Scottish Fishermen's Federation and a number of hon. Members, including my hon. Friend the Member for North Angus and Means (Mr. Buchanan-Smith), have drawn attention to the grave injustice in this case. Fishermen, particularly the inshore men, have to make a very unsatisfactory choice. Either they retire at the appropriate age for the type of work they do, and thereby lose any prospect of relief, or they carry on, despite the fact that they are approaching an age at which the nature of their job makes it highly unsatisfactory that they should carry out such arduous work.

The whole purpose of the provisions in the Finance Acts is to provide retirement relief. While the retirement ages for the bulk of the population are 65 for men and 60 for women, there should be nothing rigid about a particular age for the purposes of this entitlement. There can be no objection in principle to allowing the relief to be available to people who retire at the normal age of retirement for the job they do.

5.45 p.m.

There may be drafting problems, and it might be wrong to make an exception for fishermen alone. There may be other groups who, for equally good reasons, have to contemplate retiring earlier than those in the rest of the population. However, even if the Minister cannot accept the amendment I hope that he will acknowledge that the case is overwhelming and that he should accept it, at least in principle.

I suggest that the Minister should say that the Government accept the justice of the case and will see whether, in future legislation, a way can be found to allow groups or individuals who, not through personal choice but by the nature of their job, are expected to retire, and perhaps have to retire, earlier than the bulk of the population should not be denied any entitlement to retirement relief of the sort proposed in the Bill.

That is not an unreasonable request. If the Minister were able to give such an assurance, some of us would be happy to accept that for the time being. I hope that he will certainly not take the negative and unhelpful view that was taken by the Minister who dealt with this matter in Committee.

Mr. Lawson

We welcome the tapering relief introduced into the retirement relief by these amendments, particularly by amendment no. 24. I wish to make only two brief observations. The first is that it is worth recording how this relief came about. In the Committee stage of the Finance Bill last year my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin) moved an amendment dealing with this point. The Government said that they would look at it, but nothing happened. In the intervening year, my hon. Friend had a prolonged correspondence with the Minister of State, but there was nothing in this Bill to remedy the situation.

In Committee this year, my hon. Friend was persistent. He deserves the congratulations of the House for pursuing the matter. He tabled a new clause which, again, was not accepted by the Government, though they accepted the principle. As a result of the campaign that my hon. Friend has waged persistently for more than a year, we now have the concession in the Bill. It is a lesson to us all that it is necessary to show persistence in these matters. Sometimes it takes longer than a year before the serried ranks of Treasury Ministers give in to a reasoned case. That is one reason why it is often important that the same points are selected for debate year after year. It is no argument for not selecting a matter for debate to say that it was selected the previous year. As this case exemplifies, it is often only through persistence that a point is met.

The other issue that I wish to raise is that although we have had eloquently expressed by the hon. Member for Aberdeenshire, East (Mr. Henderson) the case for early retirement of one category of people, there is another way of looking at the matter, namely, to consider not particularly professions or categories but those people who are forced to retire early through ill health.

I know of many cases of individuals who have not reached the age of 60 having severe heart attacks and being told they must retire and sell out on medical grounds. They are then faced with the choice of going on and probably literally killing themselves in order to try to reach the age of 60 and qualify for the relief or to retire prematurely on health grounds, in which case they will forfeit the relief altogether.

When the Minister of State is considering whether there are professional categories for whom early retirement is appropriate, he should also consider the category of people who are obliged to retire early on genuine grounds of ill health. We welcome the concession but we think that there are other important matters that need consideration.

Mr. Denzil Davies

In referring to amendment no. 36 the hon. Member for Aberdeenshire, East (Mr. Henderson) extended to my right hon. Friend the Financial Secretary and myself an invitation to go for a short trip—

Mr. Henderson

A long trip.

Mr. Davies

—on a Scottish fishing boat. If the hon. Gentleman says that the invitation was for a long trip, that is what I feared. It will be clear to him when I finish speaking why I think it better to decline his invitation.

Mr. Henderson

Shame.

Mr. Davies

I shall confine my fishing activities to mackerel fishing off the coast of west Wales. That is a much less hazardous business, but not for the mackerel.

The hon. Gentleman made his case exclusively in respect of fishermen. We understand the hazardous nature of the work. We understand that many fishermen would wish to retire before 65 years, and that some feel that they have to stay on to get the retirement relief. The difficulty about accepting an amendment of this sort is that there may be other groups that are in the same position. As well as there being other groups there may be individuals in the same position. For instance, an individual may have a business that involves equally hazardous undertakings. That person may not form a group, but he might be in the same position as fishermen on account of the nature of his work.

Mr. Henderson

I am sorry that the right hon. Gentleman has declined my invitation to take a trip on a Scottish fishing boat. The invitation was offered in all sincerity and generosity. Now that the Financial Secretary has arrived in the Chamber, he may wish to reconsider his decision. He said that there may be other groups in the same position as fishermen. Is he able to tell the House of any comparable group?

Mr. Davies

I suppose that one could give a list.

Mr. Henderson

Give it.

Mr. Davies

Nevertheless, it is a bad precedent in tax legislation even to legislate for groups. There may be individuals who are in the same position. For example, a mining engineer—not necessarily a coal mining engineer—might run a business that involves hazardous work. He might feel that he wishes to retire and pass on his business because of the nature of the work. Why should such a person be excluded because we have defined groups in our legislation?

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

What objections were there to the decision to make a special group of North Sea oil divers?

Mr. Davies

There were good arguments both ways on the issue, which was not clear-cut. I am saying that we should not necessarily legislate for groups. I am saying that there may be many people who do not form recognised classes, groups or categories but who engage in hazardous businesses and would wish to have the benefit of the relief.

Mr. Henderson

Name them.

Mr. Davies

I do not know them. We cannot name them. That is why we cannot legislate for individuals or groups of individuals.

The only way to deal with the problem is by considering the age that is provided. If there is a good case for saying that the age of 65 years is too high, consideration can be given to fixing a different age.

With respect to the hon. Member for Blaby (Mr. Lawson), I do not think that we can proceed by reference to ill health. That would involve a definition of ill health. How much ill health would count? What ill health would qualify for the relief? Such a definition would make these matters extremely difficult.

The hon. Member for Aberdeenshire, East said that Scottish fishermen and fishermen in general might not be able to pass on their boats from father to son—I accept that the boat is probably the major asset—because of capital gains tax. However, clause 38, which deals with relief on the transfer of business assets, has the effect of relieving from capital gains tax that sort of transfer. There may be one or two marginal cases, but we have dealt substantially with that issue.

I accept that the value of a fishing boat is quite high, and I accept that, prima facie, there may be a charge to capital gains tax if the owner of a boat wants to pass on his business, including the boat, to his son. However, clause 38 meets that point, and in almost all such cases there would not be a charge to capital gains tax.

The problem arises if a boat is sold on retirement. The capital gains tax provisions would apply if the owner retired at the age of 55 years and sold his boat. However, that is not the case that we are discussing. The result of clause 38 is that the family venture or business is not hampered when it is wished to retain the asset and the business in the family. I can give the hon. Gentleman the reassurance that we have gone some way generally to meet his argument.

I do not believe that we can introduce general relief into tax legislation. The difficulty is not necessarily that of definition but of identifying groups and leaving out other groups and individuals who do not fall within the definition but who are deserving cases. If there is to be any relief along these lines, there will have to be general consideration of the retirement age. As society changes its views on these matters, no doubt the retirement age will be considered from time to time.

It is for those reasons that I cannot accept amendment no. 36.

Amendment agreed to.

Amendments made: No. 24, in page 31, line 40, leave out from 'retirement)' to end of line 7 on page 32 and insert there shall be substituted the following subsections:— (1) If an individual who has attained the age of 60 years—

  1. (a) disposes by way of sale or gift of the whole or part of a business, or
  2. (b) disposes by way of sale or gift of shares or securities of a company,
and throughout a period of at least one year ending with the disposal the relevant conditions have been fulfilled, relief shall be given under this section in respect of gains accruing to him on the disposal.

(1A) For the purposes of subsection (1) above the relevant conditions are fulfilled at any time if at that time,—

  1. (a) in the case of a disposal falling within paragraph (a) of that subsection, the business in question is owned either by the individual or by a company with respect to which the following conditions are at that time fulfilled, namely,—
  2. (b) in the case of a disposal falling within paragraph (b) of that subsection, either the conditions in sub-paragraph (i) to (iii) of paragraph (a) above are fulfilled with respect to the company in question or the individual owns the business which, at the time of the disposal, is owned by the company;
and in relation to a particular disposal the period, up to a miximum of 10 years, which ends with the disposal and throughout which the relevant conditions are fulfilled is in this section referred to as 'the qualifying period'.

(1B) The amount available for relief under this section shall be,—

  1. (a) in the case of an individual who has attained the age of 65 years, the relevant percentage of £50,000; and
  2. (b) in the case of an individual who has not attained that age, the relevant percentage of the aggregate of £10,000 for every year by which his age exceeds 60 and a corresponding part of £10,000 for any odd part of a year;
and for the purpose of this subsection 'the relevant percentage' means a percentage determined according to the length of the qualifying period on a scale rising arithmetically from 10 per cent. where that period is precisely one year to 100 per cent. where it is ten years."'.

No. 25, in page 32, line 22, at end insert: '(2A) In subsection (4) of that section (application of relief) for the words "subsection (1) above" there shall be substituted the words "this section" and the words "within that subsection" shall be omitted.'—[Mr. Denzil Davies.]

Mr. Denzil Davies

I beg to move amendment no. 28, in page 32, line 22, at end insert: '(2A) In subsection (6) of that section, in paragraph (b) of the definition of "family company" for the words "seventy-five per cent." there shall be substituted the words "fifty-one per cent." and for the words "ten per cent." there shall be substituted the words "five per cent.".'. The amendment modifies the definition of "family company" in section 34(6) of the Finance Act 1965, which is used for the purpose of the capital gains tax retirement relief. The clause therefore applies automatically to the roll-over relief for gifts of business assets in clause 38.

In Standing Committee the hon. Members for Chichester (Mr. Nelson) and Norfolk, South (Mr. MacGregor) tabled amendments with the aim of extending clause 37, which is now clause 38, to cover gifts of shares in a trading company in which the transferor had a material interest. Another amendment was tabled in relation to material interest. The Chief Secretary rejected that amendment but gave a commitment that he would meet the point in the earlier amendment. The amendment meets my right hon. Friend's undertaking.

Mr. John Wakeham (Maldon)

We welcome the amendment to redefine the definition of a family company and confirm that in our opinion it is a much better definition than that which was put before the Standing Committee. As the right hon. Gentleman has said, the issue was raised in Standing Committee. We are grateful to him for fulfilling the undertaking that was given by the Chief Secretary.

In many instances the definition will be fine, especially for businesses that are controlled by one family. I confirm that what has been done meets strictly the undertaking that was given. However, it will not cover some instances that many of us think it should cover—for example, family businesses that are controlled by several families, three or four families being in partnership together. That is the sort of family company that might well own a fishing boat, a subject that we were only recently discussing. Those businesses, if they were partnerships, would get relief that they do not get as family companies. These are examples that are likely to become more and more common in future, especially when professional people, or people with high skills, go into a business with a high degree of technology.

If three or four highly skilled people join together to set up a company, they will, because of the better definition that is before us but which is still not a wide enough definition, not be able to get the exemption. In welcoming the amendment and in confirming that it meets the undertaking, I am certain that we shall have to return to this topic again for further changes in the years to come.

Amendment agreed to.

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