The Economic Secretary to the Treasury (John Healey): It is interesting that both the hon. Member for Arundel and South Downs and the hon. Member for Kingston and Surbiton drew on the United States model to support the proposals made by their two groups of amendments. In a sense, the first point made by the hon. Member for Arundel and South Downs was correct. We did learn from the US experience in framing some of our new charity taxation legislation, but we adapted and applied it to particular British circumstances, which in some respects are different. His group of amendments would take us a step closer towards the US system. The second group of amendments spoken to by the hon. Member for Kingston and Surbiton would take us still closer towards it.
I particularly welcome the strong recognition that the hon. Member for Kingston and Surbiton gave to the changes in the support that we have given to charities since 1997. He asked about the cost of the amendments. We have an estimated cost, which is fairly provisional, of £5 million. [Laughter.] Particularly with works of art, it would only need one very large donation under that regime significantly to increase the estimate. Cost is categorically not the reason why I recommend to my hon. Friends that they do not support the amendment, as our track record over the past few years in providing generous provision to boost charities suggests.
I shall briefly explain the purpose of the clause and deal with the problems with the amendment. Clause 96 will extend the relief, which we introduced in the Finance Act 2000, for gifts to charity of listed shares, land or buildings. From April 2002, individuals and companies giving a freehold or leasehold property to charity will be able to claim relief on its market value in computing their income or profits for tax purposes.
Column Number: 380The extension of the relief has been welcomed by charities.
Amendments Nos. 90 to 92 seek to extend the relief for gifts of listed shares and real property to ''qualifying works of art'', and amendments Nos. 207 to 210 seek to extend the relief to all moveable property. The existing types of asset that come within the relief are relatively easily valued for claiming the relief in the first place and are readily realisable, which means that a charity has an option to hold or sell a gift to draw its benefit. Extending the relief to all moveable property could lead to charities receiving assets that have no investment value or are not readily convertible into money. The difficulties in valuing such a wide range of assets would add significant complexity to the working of the relief for both donors and the Inland Revenue. The hon. Gentleman significantly down played the potential problem of complexity in his remarks.
Mr. Jack: Where does the Economic Secretary's logic, which I hope I have followed correctly, lead for somebody who set up a charity to collect individual items, which they might have been offered under the amendment? Effectively, they could not accept such items because of the line that he is taking. He puts the complexity of the use of an asset to a charity as a reason for not accepting the amendment. If, for example, somebody had a prize collection of motor-cars in a motor museum and had set up a charity for the purpose of collecting a particular mark of car, why should they not have the benefit of the provision if they were offered such a car?
John Healey: Quite simply, the provision that we are trying to make here is to give a boost to charities right across the field, irrespective of the particular activities that they undertake. The example that the right hon. Gentleman suggests is, if not singular, relatively uncommon. Most charities are not geared up specifically to collect items, and the problems caused by the impact of the amendments should not be underestimated.
Mr. Davey: There is another check on the types of donations that would be likely to flow if the Economic Secretary were minded to accept the amendment, which is that a charity has to want to receive them. Unless he is suggesting that a charity might receive a whole series of gifts for which it has no use but which need storage space, incur collection costs and so on, he is implying that the proposal would help an individual corporation to reduce its tax liability although the mechanism would not be in the charity's interest. I do not understand the Government's reasoning. The necessary check is in the clause.
John Healey: I am completely unconvinced by the hon. Gentleman's argument. It does not take much to imagine charities being badgered by all sorts of people to accept all sorts of gifts under the amendments he tabled. That is likely to be a source of aggravation and unnecessary activity and I am not convinced that the amendments would have the beneficial impact that he wants to achieve.
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Rob Marris: I have in mind several charities that do excellent work collecting old computers and so on which are often donated by companies. It would be a nightmare to make valuations of old computers.
Mr. Flight: Zero.
Rob Marris: It might be zero or £5 million, but it would be a nightmare to make those valuations.
John Healey: I agree with my hon. Friend who anticipated the second part of my reply to the hon. Member for Kingston and Surbiton. His amendments would impose complex activities on the charity and also the complication of having to obtain valuations of a wide range of gifts to draw down the relief.
Mr. Mark Hoban (Fareham): I just wonder how the Economic Secretary's argument about the difficulty of valuation, the problem for donors and the Inland Revenue, and the huge complexity that might arise from the treatment of moveable assets relates back to other clauses in the Bill. Clause 54 refers to gifts of medical supplies and equipment. Surely the valuation issue he raises applies equally to that clause, which the Government put in the Bill.
John Healey: The hon. Gentleman cites an example of goods that are tightly defined and relatively easily valued and realised, unlike those that might be covered by the amendments tabled by the hon. Member for Kingston and Surbiton.
Mr. Hoban: I am afraid that the Economic Secretary's argument was not very good. One of the assets to which the Charities' Tax Reform Group refers as potentially falling within the scope of the amendments tabled by the hon. Member for Kingston and Surbiton is scientific equipment, which is very close to medical equipment and must be relatively easy to value. His argument is not as robust as he makes out.
John Healey: It strikes me that the hon. Gentleman is making my argument for me in that medical goods have a market value that is readily identifiable. They are a defined set of goods and relatively easy to manage compared with the scope of the goods suggested by the hon. Member for Kingston and Surbiton.
The value and benefit of wanting to extend the existing provisions to land and property is that valuation is relatively easily undertaken and if a charity does not wish to accept a gift and use it for its own purposes, it is relatively easy for it to realise its value and to gain the benefit of the donation.
Mr. Flight: In my reference to other potential assets, I sought deliberately to restrict them to items that were reasonably valuable. The valuation point is understood, for better or worse, but a second point arises. Charities want a category of assets wider than quoted shares, land and works of art for which valuation is not a major issue to qualify and I shall be interested to hear the argument concerning those categories for which valuation is not a great problem.
John Healey: In respect of our previous discussion, qualifying works of art is a category for which there may be other problems, but not specific valuation problems. The hon. Gentleman will appreciate that I
Column Number: 382am trying to deal with all the amendments grouped together. I shall return to his points.
The clause will extend the relief for shares under Budget 2000 to real property. The purpose is to incentivise new sources of giving to charity. Amendments Nos. 207 to 210 would extend relief to everything from rare works of art to second-hand clothes and household goods. We are not convinced that a further incentive is needed at either end of that range. There is certainly no evidence that the second-hand clothes and goods markets need stimulation in relation to charities. At the other end of the range, there are sufficient incentives in the inheritance and capital gains tax regimes to encourage gifts of works of art and to protect that heritage. As the hon. Gentleman knows, there are extremely generous reliefs from inheritance tax and capital gains tax for such gifts, including for private treaty sales of pre-eminent works of art and other heritage assets to museums and galleries. There is no capital gains tax or inheritance tax on a gift to a qualifying museum or gallery.
Mr. Jack: Can the Economic Secretary confirm that in the operation of, for example, the inheritance tax there are no significant valuation problems?
John Healey: If the right hon. Gentleman will forgive me, I will make some progress. There is a particular difficulty with the valuation of works of art, but it is not the general one that we are discussing.
Mr. Davey: Would it not be possible to deal with the problems that the Economic Secretary suggests are contained in the amendments by introducing a value below which tax relief would not be possible? That would move us away from the idea that people could seek tax relief on second-hand clothes and books. Surely, it would be simple to introduce such a figure. We could then be clear that assets only above a certain amount would be deemed to qualify. The Minister is right: along any high street in Britain, one can see that people readily donate their second-hand clothes and books. Charities that advocate the measure, however, do not have such assets in mind.
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