§ The Chief Secretary of the Treasury (Mr. Leon Brittan)I beg to move amendment No. 64, in line 18, leave out from 'which' to end of line 20 and insert
'the voucher is handed over in exchange for money, goods or services (a voucher which is posted being treated as handed over at the time of posting).'This is a technical amendment that concerns the date on which an employee who uses a cheque voucher is deemed to secure a benefit. The words deleted tie the benefit to the obtaining of money, goods or services. The amendment ties it to the tendering or the posting of the cheque. There can be only one date on which a cheque is tendered or posted and the amendment is designed to avoid possible doubt or difficulty about the date on which a charged tax arises. I commend the amendment to the House.
§ Amendment agreed to.
§ Mr. CookI beg to move amendment No. 65, in page 35, line 34, after '1982' insert
'former employees of a passenger transport undertaking under arrangements in operation on 31st December 1969 or'.
§ Mr. Deputy Speaker (Mr. Ernest Armstrong)With this it will be convenient to take amendment No. 66, in page 35, line 37, at end insert—
'(aa) his former employer'.
§ Mr. CookThe origins of the amendment go back to last year when the Committee debated the provision in the Finance Bill to bring transport vouchers within tax. As a result of representations from the Opposition, the Chief Secretary gave a commitment on Report to protect employees of British Rail and other transport undertakings from the effect of the change in the law so that the traditional arrangements by which those concessions were not liable to tax were preserved. We are grateful to the Chief Secretary for honouring that commitment in this year's Finance Bill.
Since the matter was considered in Committee—when we passed the clause that gave effect to last year's undertaking—it has emerged that a small group of people who previously benefited from the traditional tax arrangement will apparently be outwith the scope of the clause as drafted. They are former employees of British Rail who have been transferred to other transport undertakings that have been created by Act of Parliament. The most obvious is the National Freight Corporation. Many former employees of British Rail were transferred to the NFC when it was set up, especially National Carriers. A smaller group of people are employed by other transport undertakings—for example, the docks. All are in the public sector and all were set up by legislation. In every case, the employees were transferred from British Rail to their new employer by an Act of Parliament, not by their own actions. The employees did not choose to change their employers. Although they continued to work 917 at the same place and do the same job, by a change in the law, they discovered that their employers had been changed from one public sector undertaking to another.
Anyone who has been recruited by those companies in the past 13 years is not eligible for any transport concession from British Rail. Only those who were employees of British Rail in the late 1960s, when the new arrangement was created, obtain travel concessions. As part of the transfer arrangements and to ensure that there was no worsening of conditions, those employees continued to enjoy the same transport concessions as employees of British Rail.
As a result of the drafting of the clause, such employees will now be liable to tax on the travel concession, although their former colleagues in British Rail who have remained in its employ will not be liable to tax on the same transport concession. It is unclear how those who were not liable to tax under the previous arrangement should now, under the clause as drafted, be brought within the scope of tax.
I hope that the Chief Secretary will say that this anomaly is the result of an oversight—that those people have been forgotten 13 years after being transferred from British Rail to another employer. I hope that, if he cannot accept the amendment, he will accept the principle of our anxiety and ensure that they will be protected from tax on a concession on which other employees of transport undertakings will not be taxed.
§ Mr. BrittanI was aware of the concern of the hon. Member for Edinburgh, Central (Mr. Cook) before he tabled the amendment, as representations on these lines had been made. As the hon. Gentleman was good enough to say, we have honoured the undertaking that I gave in Standing Committee on last year's Finance Bill, and naturally I wanted to consider carefully whether the principle embodied in the change enacted pursuant to that undertaking required or necessitated the hon. Gentleman's further amendment.
I must tell the hon. Gentleman that I do not accept his argument in this instance. Last year's Bill contained a provision to ensure that, when employers bought season tickets for their employees, the cost of those tickets should be assessable as a benefit to the employee. That was generally accepted to be right.
On Report last year, the hon. Member for Edinburgh, Central himself said:
We accept that it is right and proper that if an employer furnishes a transport voucher to his employees to enable them to buy season tickets for use on the railways, it is proper that the employees should be taxed on the benefit in kind that they receive as a result.That seems a generally acceptable principle. He went on to explain that the official Opposition had not challenged the clause in Committee because they understood that it did not disturb the basis of assessment laid down in the 1975 (No. 2) Act,that the employee will be taxed by an amount equal to the expense incurred by the person providing the voucher.—[Official Report, 15 July 1981; Vol. 8, c. 1318.]The whole argument about transport undertakings was on the basis that it was difficult in cases such as British Rail to establish that any real cost at all was incurred by the employer in providing travel concessions for its own employees. In the course of that debate, I said that the Inland Revenue was examining the argument that British Rail incurred no expense in providing privilege travel 918 concessions for its employees. In the event, the Inland Revenue—I wholly concur with its conclusions—was not persuaded that the argument was valid. None the less, to fulfil my promise not to disturb the status quo in relation to British Rail, the relevant provision was introduced in the Bill.There was never any question, however, of extending such an exemption to employees of bodies which actually made payments for travel concessions.
§ Mr. BrittanIf the hon. Gentleman will contain himself for a moment, I am sure that he will have the opportunity to intervene at the appropriate moment. I have not yet reached the nub of the argument, although the hon. Gentleman, with his customary acuity, has no doubt anticipated it well in advance.
There was never any question of extending such an exemption to employees of bodies which actually made a payment to a transport undertaking to secure travel concessions and I can see no justification, consonant with the principle on which we have operated, for extending exemption to those whose free or cheaper travel has been paid for. The hon. Gentleman himself accepts the principle that the measure of the benefit should be the amount of expense incurred by the person providing the benefit.
A limited group of people who have been receiving benefit may now find that they have to pay a tax which they would otherwise not have been obliged to pay, but we cannot really envisage people carrying a tax exemption with them as a portmanteau donation for the rest of their lives, or even for the rest of their working lives. The normal incidence of tax changes which are justifiable on the ordinary principles of tax, and on the principle which the hon. Gentleman has agreed is appropriate, must therefore apply. Whether or not, as a result of any adverse effect on the total financial position of the people affected, there are grounds for any other adjustments of their general emoluments is a matter not for revenue law, nor for the House, nor indeed for the Government on this occasion. Therefore, the principle that we could not accept, but for which I see a case, has been fully honoured by the propositions that we put forward. I cannot go further and accept the hon. Gentleman's amendment.
§ Amendment negatived.