§ The Second Deputy Chairman of Ways and Means (Mr. Paul Dean)With this it will be convenient to discuss amendment No. 13, in page 9, line 12, leave out subsection (2).
§ Mr. StrawUnder clause 11 the facility for paying capital transfer tax by instalment is extended from eight years to 10 years. We have tabled the amendments to discover the reason for that change.
§ The Economic Secretary to the Treasury (Mr. John Moore)I appreciate the tenor and the way in which the hon. Member for Blackburn (Mr. Straw) has requested further, legitimate information. It is important for the wider public.
The purpose of amendment No. 12 is to annul the proposed increase in the capital transfer tax instalment period from eight to 10 years. The instalment facility recognises that taxpayers may find difficulty in paying in 1055 one sum the capital transfer tax attributable to certain types of property which are not readily marketable; or alternatively that meeting the liability would entail selling some of the property concerned, possibly to the detriment of, for example, a business.
If the taxpayer elects to pay by instalments, the number of annual instalments is eight. It has been represented on a number of occasions that as a measure of help particularly to businesses, including agriculture, the number of instalments should be increased.
The Government have some sympathy with that point. We propose to increase the number of annual instalments from eight to 10. That ties in with the 10-yearly charge on discretionary trusts so that where the property of a trust is such that the tax can be paid by instalments, one instalment will be payable each year. At the same time, the opportunity is being taken to simplify the present scheme by withdrawing the facility to pay by half-yearly instalments, which is comparatively little used.
I am sure that the hon. Member far Blackburn will understand the relevance of the first part of the clause, and that he will not wish to press his amendment.
The purpose of amendment No. 3 is to annul the proposed increase from £5,000 to £20,000 in the de minimis limit. For the tax on unquoted shares to be payable by instalments, the value transferred attributable to them must exceed £5,000, and they must represent at least 10 per cent. of the company's nominal share capital: or, if they are ordinary shares, must reptesent not less than 10 per cent. of the value of such shares. The de minimis limit of £5,000 has remained nominally unchanged since 1975. The extension by the Labour Government with effect from October 1977 of business relief to minority holdings in unquoted companies at a rate of 20 per cent., meant that for practical purposes the limit was then reduced to £4,000 and with the further increase to 30 per cent. agreed in clause 10 there will be a further reduction to essentially £3,500 on the old limit, or £14,000 effectively on the proposed £20,000 de minimus limit.
The limit itself is clearly overdue for revalorisation. The equivalent in real terms today of £5,000 in 1975 is something over £13,000. An increased limit of £20,000 will, after taking account of the proposed 30 per cent. business relief, produce an effective limit of £14,000, broadly matching the limit as it was in 1975.
It is useful for the Committee to put these specifics on the record, and I thank the hon. Member for Blackburn for providing the opportunity. I hope that he will withdraw his amendment.
§ Amendment, by leave, withdrawn.
§ Clause 11 ordered to stand part of the Bill.