ACCEPTANCE IN LIEU: CAPITAL TRANSFER TAX AND ESTATE DUTY (Hansard, 16 July 1987)

Mr. Milian
I beg to move amendment No. 89, in page 63, line 22, leave out 'may' and insert 'shall'.
We are dealing with a case where property is transferred in settlement of capital transfer tax and the property has a value attributed to it at a date earlier than the date that the property is actually accepted. At present, the clause nevertheless provides that interest may be charged from that earlier date. It does not make that mandatory, but it allows the Revenue presumably to determine or argue that the interest should he payable although the value of the property is as determined at the earlier date.
This is a case of the Revenue in certain instances trying to have it both ways. The logical position would be that if the value of the property was determined on a particular date, no interest should be payable from that date. The effect of my amendment would simply make that the position rather than allow what seems to be the present case in the drafting where there is an element of discretion on the part of the Revenue.

§ Mr. Norman Lamont
In the Budget and the Finance Act 1987, before the election, we enacted provisions whereby property could be offered in lieu of tax—that provision already existed—but we said that the interest calculation could be from the point at which the property 1338 was offered or the point at which it was accepted. Previously, it had been from the time when the property was accepted and interest ran to that point.
The right hon. Gentleman will appreciate that we gave the person offering the property the opportunity of having interest stopped at the point when the property was offered and he would have that choice. He would have the choice of a longer period of interest or the benefit of a possible higher value on the property over a longer period of time. That provision was enacted in respect of inheritance tax and it already exists in legislation. That legislation uses the word "may" to which the right hon. Gentleman objects. Clause 97 has only a minor function in that it mirrors the provisions to which I have referred, but in respect of pre-1985 capital transfer tax and estate duty. It has only a very narrow provision. If we simply alter the word "may", the right hon. Gentleman's amendment will not alter the provision with respect to the new tax. That is a minor reason against the amendment.
7.15 pm
I am not violently opposed to the right hon. Gentleman's proposition. It is born of a little distrust of the Revenue which seems to inspire some of these debates, I do not believe that substituting the word "may" for the word "shall" will mean that the Inland Revenue will not operate the policy announced in the statement of practice which was announced to the House. The question is being deliberately left open so that it will be negotiable along with other terms for the acceptance. The acceptance transaction represents a purchase by the Government at a negotiated price, and the interest terms are part of that price.
In general, the offerer's options will remain open until the item is formally accepted, but I agree with those who have said that interest relief should be available only for bona fide offers. I do not think it would be right to allow the "offer date" basis to remain open indefinitely. That might encourage people to procrastinate in order to exploit the new arrangements—for example. by continuing to enjoy income from the property. We envisage that after two years have elapsed from the date of an offer without the terms being settled the Inland Revenue may give the parties six months notice that it will no longer be prepared to accept the item on the "offer date" basis. This was announced in a Revenue press release on 8 April.
However, we do not want to rule out the possibility of a property being accepted on the basis of its value as at a date earlier than that of the acceptance even when waiver of interest is not appropriate because the two-year period has been passed. That is the only reason why the word "may" rather than "shall" has been used. We might seek to negotiate and be generous to the taxpaper who may wish to negotiate on the basis of the "offer date" value because the current value is less. That is why the word "may" has been used. We have a statement of practice. The policy was announced, and that is the only way in which the Revenue intends to exercise its discretion. I hope that my words in this debate will have some effect. I am not violently opposed to the right hon. Gentleman's suggestion.

Mr. Milian
I am grateful to the Minister for what he has said. I appreciate the points that he has made about this being a matter for negotiation. On the basis of what 1339 the Minister has said and in the hope that the Inland Revenue will in practice apply the provisions in that spirit, I beg to ask leave to withdraw the amendment.