'In Part II of Schedule 1 to the Finance Act 1974 (conditions of allowance of interest relief on loans for purchase or improvement of land), after sub-paragraph (7) of paragraph 4(A) (inserted by section 36 of the Finance Act 1977) there shall be inserted—
(8) For the purposes of this paragraph living accommodation shall be treated as job-related for a person carrying on a trade of victualler as lessee or tenant of licensed premises under a lease or tenancy who is required by the terms of that lease or tenancy to reside in the accommodation being accommodation forming part of or attached to the licensed premises provided that only interest paid on or after 5th April 1982 is eligible for relief by virtue of this sub-paragraph.
(9) For the purposes of sub-paragraph (8) above 'licensed premises' has the same meaning as in section 200(1) of the Licensing Act 1964.
(10) In subsection (8) section 101 of the Capital Gains Tax Act 1979 (relief on disposal of private residence) sub-paragraph (8) above shall not have effect in relation to any time before 5th April 1982.".'.—[Sir William Clark.]
§ Brought up, and read the First time.
§ Sir William Clark (Croydon, South)
I beg to move, That the clause be read a Second time.
This debate is a little more mundane. It is on interest relief for those in job-related living accommodation. The House will recollect that, if one buys a house on a mortgage, mortgage interest relief is given. A person, because of his occupation, may have to live in the premises but at the same time he is probably saving up to buy a house for his retirement. If he is in job-related premises—for example if he is the manager of a public house, or a clergyman—as he pays his tax under schedule E he is entitled to get not only capital gains tax relief, which is available to everyone else, on the house that he is buying for his retirement but mortgage interest relief on the mortgage that he has taken out in order to buy that house.
There is an anomaly and an injustice. In the licensing trade—I assure you, Mr. Deputy Speaker, that I have no vested interest in licensed premises, apart from being a customer occasionally—sometimes licensed victuallers who run public houses are tied tenants. As tied tenants they come under schedule D for tax purposes. Therefore, my understanding is—and I have counsel's opinion to back me up—that they are not entitled to mortgage interest relief for the house that they are buying for their retirement. It is an anomaly and an injustice that those who, to all intents and purposes, are in precisely the same position as the manager of a public house do not get the same treatment.
It is the philosophy of this Conservative Government, whom I support, that we do all we can to help the small business man. Among the small business men are the tied tenants of public houses. I understand that in Scotland, for some obscure reason which escapes me at the moment, some of the clergy are deemed to be self-employed persons rather than schedule E persons. As self-employed persons they are, of course, assessed for tax purposes under schedule D. They are, I understand, in precisely the same awkward position as the tied tenant of a public house.
There was a tax case on the question, Frost v. Feltham, in 1980. I am assured by counsel that it does not apply to all tied tenants. Consequently, tied tenants cannot get the relief. If the Minister can assure me that any tied tenant 776 who is assessed under schedule D will be entitled to the same mortgage interest relief and the same capital gains tax relief as any other schedule E taxpayer, I shall be content. I look forward to hearing what he has to say.
§ Mr. Ridley
I am grateful to my hon. Friend the Member for Croydon, South (Sir W. Clark) for raising this point. I find it very difficult to determine what should or should not be done in regard to it. One has sympathy with the persons concerned, but it is always difficult to legislate for one group. As soon as one thinks of a particular group, one thinks of another. My hon. Friend thought of the Scottish clergy. I had not realised that they were involved and I shall look into the matter. My hon. Friend will know that farm tenants, who are taxed under schedule D, also suffer from the disability that they fall outside the "only or main residence" test.
The rule was breached in 1977 for employees living in what was called job-related accommodation, if it was necessarily provided for the performance of their duties, if it was customary to provide such accommodation, or if it was provided because of a special threat to their security. They were then allowed to claim mortgage interest relief on a home other than where they lived.
It has never been felt that objective indicators could be found for the self-employed similar to the ones that I have mentioned for the employed. Once one draws the line at licensed victuallers, then at Scottish clergy and then at farm tenants, there are ever more categories of other people who will be the next to press for the line to be moved.
As my hon. Friend says, there has been a High Court case, Frost v. Feltham, in which Mr. Justice Nourse gave guidance as to the conditions under which mortgage interest relief should be allowed for a licensed victualler who was a tenant and wished to finance the building of a house away from the job-related accommodation in which he lived. The conditions concerned the type and length of his security of tenure, whether he had been dealing in property or it was his first purchase, whether the house was fully furnished, whether it was a proper home or just a pied-à-terre, the frequency and length of visits that he paid to it, and its distance away from the public house where he worked.
That is a piece of judge-made case law and we shall wish to see its effect. Many licensed tenants will qualify under the new conditions. I have frequently pressed the National Association of Licensed Victuallers to describe the position of its members as a result of the case, but so far I have had no reply. Although I have been watching the matter with a sympathetic and friendly eye, I have not been helped by those whose job it should be to press the reform upon us.
I doubt whether there is a problem with this group, but my right hon and learned Friend the Chancellor and I are studying the problem carefully. I am grateful to my hon. Friend for having drawn attention to it now. We shall not lose sight of it for the future.
§ 1 am
§ Sir William Clark
I am grateful to my hon. Friend for that reply. If a tenant farmer must live in a farm because of his terms of employment, although he is taxed under schedule D, why should he not enjoy the same privileges as an ordinary employee? If he is the manager of a farm, he should be treated in exactly the same way as the 777 manager of a pub. I shall certainly inquire whether the National Association of Licensed Victuallers knows of any cases, but this is a question of principle. Because of a quirk in that a person is taxed under schedule D instead of schedule E, for whatever reason, it is unfair not to give him the same tax advantages as an ordinary employee. As my hon. Friend has given an undertaking to keep the matter under review, I beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.