HC Deb 16 December 1999 vol 341 cc389-91
7. Mr. Laurence Robertson (Tewkesbury)

What plans he has to meet the chairman of the Inland Revenue and hon. Members to discuss tax issues relating to compensation given to former land settlement tenants. [101771]

The Paymaster General (Dawn Primarolo)

There are no plans for such a meeting. Representations have been made querying the raising of tax charges by the Inland Revenue in respect of an out-of-court compensation paid by the Ministry of Agriculture, Fisheries and Food, in the early 1990s, to a number of former tenants of the Land Settlement Association, but it has been made clear that Ministers do not intervene in individual cases. The Inland Revenue's independence from Treasury Ministers in handling individuals' tax affairs must be scrupulously observed. When disputes continue between taxpayers and the Revenue, it is for the appeal commissioners and the courts to determine how the law is to be applied.

Mr. Robertson

I thank the Minister for that reply. At some stage, however, Ministers have been involved in the matter. Although the Minister quite rightly said that the award was made by MAFF in the early 1990s, the then Minister said in a letter to the chairman of the Inland Revenue that

"it was quite clearly Ministers' intention at the time of the settlement that the out-of-court payments were intended to compensate the ex-tenants of the LSA for personal hardship … it was not therefore intended as taxable compensation for loss of earnings".

I really do think that the Minister should get involved in resolving what is clearly a gross inequity.

Dawn Primarolo

The rules applying to the Land Settlement Association are the same as those applying to all other taxpayers; an exception would be possible only if a specific amendment were in a Finance Bill or if an extra-statutory concession were publicly announced. Such an exception may be authorised only by a Treasury Minister, and Treasury Ministers in the previous Government made no such authorisation. Ministers in the previous Government did not put in place the rules that the hon. Gentleman claims that they should have. Consequently, normal taxpayer rules apply.

Mr. Howard Flight (Arundel and South Downs)

The House will be aware—as I am sure that you are in the west midlands, Madam Speaker—that many land settlement tenants have retired or are farmers. The Government have hardly been helpful to those two categories of people—indeed, one might argue that those people have been victimised. By refusing to support the intent of the previous Government, are not the current Government imposing yet another stealth tax on two categories of people whom they have already hit hard? Secondly, will the Minister not admit, as the Chancellor has already admitted, that the overall burden of taxation has gone up from 35.3 per cent. of gross national product in the tax year 1996–97 to more than 37 per cent. this year, and that that is a marked rise in taxation?

Dawn Primarolo

The hon. Gentleman fails to understand how the tax system works. It was not the intent of the previous Government to make such an arrangement. Had it been their intent, they would either have tabled a specific amendment to a Finance Bill—they did not; the issue was settled in the early 1990s—or put in place an extra-statutory concession to give influence to that compensation. The hon. Gentleman is asking us to breach the principle and require Ministers to get involved in individual taxpayers' affairs. Relations in the tax system are clear. An appeal must go to the appeal commissioners and then to the courts. That is the position over which the previous Government presided and it would be foolish to require Ministers to intervene inindividual matters now. Some individuals have settled. Others continue to argue hardship. The proper way forward is for them to appeal to the appeal commissioners and then, if they are not satisfied, to the courts.

Mr. Phil Woolas (Oldham, East and Saddleworth)

In the light of the questions that she has been asked today, which does my hon. Friend think is falling faster—the tax burden or the reputation of the right hon. Member for Horsham (Mr. Maude)?

Madam Speaker

Order. That was rather a wasted question.

Sir Nicholas Lyell (North-East Bedfordshire)

Will the Minister reconsider what she has just said about the former tenants of the Land Settlement Association? We are talking about people who endured pain, suffering and hardship for years. Compensation for that is not taxable. Will she recognise that such poor people have no money to go to the special commissioners or through the Court of Appeal? Before they are driven down that route, there should be a meeting with the head of the Inland Revenue. The Minister should kindly read the question that she is answering, which refers not just to Ministers, but to the head of the Inland Revenue. Such a meeting would enable Members on both sides of the House who represent those poor people to help them find a fair way through their harsh and unfair situation and solve the problem before they are driven to court, adding to the burdens of those whose suffering we should be sympathising with rather than increasing.

Dawn Primarolo

I am surprised by the right hon. and learned Gentleman's heavy criticism of the actions of his colleagues when they were in power, because they decided not to make specific arrangements. As he knows, compensation for personal hardship is not liable to income tax. Compensation for loss of trading profits is taxable as a trading income. That was established when the compensation was paid by the previous Government, whose Treasury Ministers failed to make any legal provision of the type for which they are now arguing, to change the calculation of tax on compensation. They now ask for a Treasury Minister to intervene in individual tax affairs. That should not and cannot happen. The appeal system is clear in legislation.

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