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Finance Bill

Finance Bill

Column Number: 327

Standing Committee B

Tuesday 3 June 2003


[Sir Nicholas Winterton in the Chair]

Finance Bill

(Except Clauses 1, 4, 5, 9, 14, 22, 42, 56, 57, 124, 130 to 135, 138, 139, 148 and 184 and Schedules 5, 6, 19 and 25, and any new Clauses and Schedules tabled by Friday 9th May 2003 relating to excise duty on spirits or R&D tax credits for oil exploration.)

4.30 pm

The Chairman: I bid good afternoon to all members of the Committee. I give notice that, at the Government's request, there will be a meeting of the Programming Sub-Committee at whatever time is appropriate. It may be 7 o'clock, it may be after, it may be before, but I give notice to hon. Members who sit on it, so that they can make the appropriate arrangements.

I gather that some progress has been made in my absence, but perhaps not enough. I am dependent on the co-operation of the Government Whip, the Opposition Whip and the minority parties. Let us see what we can do this afternoon. I understand that the Financial Secretary was speaking—[Interruption.] It was the Chief Secretary—I do apologise, because there is rather a difference in salary, let alone anything else. The Chief Secretary, whom I have known for many, many years, as he appeared in debates even before he entered this place and was formidable even then, was talking to clause 46 stand part.

Clause 45

Contract and conveyance: effect of transfer of rights

Question proposed [this day], That the clause stand part of the Bill.

Question again proposed.

The Chief Secretary to the Treasury (Mr. Paul Boateng): Sir Nicholas, I bid you a good afternoon on behalf of the whole Committee.

The Chairman: I am sorry, we are discussing clause 45. I am trying to make progress.

Mr. Boateng: We can take a hint, Sir Nicholas. I think that we all feel a bout of co-operation coming on. [Interruption.] Maybe we do not. Certainly you can rely on the co-operation of Government Members, as ever, Sir Nicholas.

Let me give evidence of that at the outset by responding to the hon. Member for Billericay (Mr. Baron). I promised that I would reflect over lunch on his contribution to the morning's deliberations. I did

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that. I had a take away, he will be glad to hear, such was the extent of my reflection and deliberation and, as a result, I owe him an apology.

There has been what is best described as a fundamental transposition. There are two words in the wrong place—I fear two rather vital words. The first sentence of paragraph 9 of the explanatory notes, which currently reads

    ''A enters into a contract to buy land from B for £100,000'',

should read ''A enters into a contract to sell land to B for £100,000''. As a result, all should now be clear, where before I fear it was not only less than clear but positively erroneous. I apologise to the Committee and the hon. Gentleman for having inadvertently misled them through that unfortunate, fundamental transposition.

On the further point of substance that was raised, I want to make clear the practical effect of clauses 44 and 45 by reference to the figures in the example in paragraph 9, as corrected. C will be charged to stamp duty land tax on a total chargeable consideration of £110,000, which is the aggregate of the £20,000 he pays to B and the £90,000 he pays to A. In other words, C is charged on the same amount as if A had conveyed to B and then B to C.

As regards the charge on B, we have recently received representations about situations in which a subsale relief might be legitimately incorporated in stamp duty land tax. We accept many of the concerns that have been expressed. Let me make this crystal clear for the benefit, in particular, of the hon. Member for Torridge and West Devon (Mr. Burnett)—I indicated earlier that I hoped that I would be able to put his mind at rest. It is not the Government's intention that, in the example in paragraph 9, as corrected, B should be chargeable to stamp duty land tax, unless the contract between A and B is substantially performed. We hope that that will address the concerns of off-plan market makers. I have gone further than that. I have asked my officials to ensure that the legislation has that effect, with a view to introducing any necessary clarifying amendments on Report for the avoidance of any doubt at all.

If the contract between A and B is substantially performed—for example, by B taking possession or receiving rent—B will be charged to stamp duty land tax on the contractual consideration of £100,000. I am sure that the hon. Member for Torridge and West Devon would accept that not to charge B when there has been substantial performance would be to permit the continuance of a stamp duty avoidance scheme. I do not believe that that is justified; nor, I suspect, does anyone on the Committee. I described the avoidance scheme, which is known as resting on contract, this morning.

I hope that the undertaking that I have given on relief for B when a contract is not substantially performed will go a long way towards allaying the fears that exist in the industry, but we are anxious to explore other problem areas in the consultation process. As I indicated, if matters emerge in the course of that process, we will take steps to revisit them.

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Mr. John Baron (Billericay): I thank the Chief Secretary for spending such a productive lunch considering the matter. I just want to be absolutely clear about it. The matter is somewhat confusing, and I appreciate his efforts to clarify it. Will he confirm that there is no way whatever that the £90,000 could be taxed twice? As I understand it, we have effectively taken A and B out of the equation, because the example was badly phrased. Will he confirm that with regard to the example given? The example illustrates the fact that the area is terribly complex, and we should be as precise as we can in relation to wording because it can lead to great misunderstandings and cause some consternation in the world outside. I am sure that that point will be taken on board.

Mr. Boateng: B is out of the equation, so there can be no question of double taxation, if there is no substantial performance. I return to the point that I made this morning. The test is always whether there is substantial performance. If there is, the possibility arises; if there is not, no possibility exists of payment twice on the £90,000.

Mr. Mark Prisk (Hertford and Stortford): I am delighted that the Chief Secretary clearly had a conducive luncheon, which led him to this step forward. May I remind him—this relates to the point raised by my hon. Friend—of the question that I raised twice? I hope that he is about to answer it, but I do not see any sign of that. I asked whether, when a housebuilder buys land, parcels it up, develops it and sells the house on, they would be subject to stamp duty land tax on the land. I did not get an answer. The question relates to the current point. I hope that I will get an answer now.

Mr. Boateng: I am not sure that I will be able to assist the hon. Gentleman on that point without some considerable elaboration that we will come to when we deal with a clause that we have yet to consider.

Let me return to the point raised by the hon. Member for Billericay in relation to the question of substantial performance. Where there is no substantial performance, there is no charge. The example that the hon. Member for Hertford and Stortford (Mr. Prisk) gave is that one could envisage circumstances in which there might be substantial performance, but I do not want to go down that route at this stage. I have no doubt that we will revisit it, and I hope that when we do he will be satisfied with what I say to him.

Mr. Baron: I apologise to the Committee for pressing the point, but clarity is required. Half way through the example given in the explanatory notes is the following:

    ''B will pay stamp duty land tax under clause 44 on the chargeable consideration payable under the first contract, £100,000.''

Is that a typing error? Should it read ''the first £10,000''? That is what I mean when I say that we are double charging on £90,000. I would appreciate if the Chief Secretary would clarify that point. It is a confusing sentence, and I may be reading it the wrong way.

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Mr. Boateng: It is confusing only if the figures are wrong, and I have no reason at this stage to believe that they are. Caution precludes me from saying that they are not, but I have absolutely no reason to believe that the figures quoted are wrong, and that one should read ''10'' for ''100''. The important point to recall—I keep going on about it, but it is at the heart of what we are talking about—is that the charge for B will be £100,000 if there is a substantial performance, not £10,000.

Mr. Baron: There is a big difference between £100,000 and £10,000, and if the figure stands at £100,000, I put it to the Chief Secretary that there is a double tax charge on £90,000. I would appreciate it if the Chief Secretary would clarify the point. Is that figure of £100,000 meant to read £10,000, which would clear the matter up, or is it meant to be £100,000? In that case, we need further clarification from the Chief Secretary. Even if we change A and B, as the wording stands, there is still the double charge on the £90,000.

Mr. Boateng: I do not want to labour the point, but I can give the hon. Gentleman another example, or I can revisit the worked example that he raises in questions in correspondence. Were I to take the former course, I fear it would delay the Committee more than Sir Nicholas would wish, so perhaps I should take the latter course and write to him about the worked example.

Mr. Baron: I apologise to the Committee for testing its patience, but could I ask the Chief Secretary to clarify the example in the explanatory notes, if possible during this sitting, or by the time of the next sitting, instead of writing to me in correspondence with another example, as that would be more useful to all concerned? Is the figure £100,000 or £10,000? If it is £10,000, it is a single tax charge; if it is £100,000, it is a double tax charge. The example should be worked on rather than something new produced.


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