Mr. Flight: I am delighted to hear that the Government have taken up the subsale point. I am slightly disappointed that they have not focused on it before, given its antiquity, but it is important that they do so now. The easiest example of its importance relates to builders breaking land into plots and selling it on. On the basis that the Financial Secretary said that on Report subsequent amendments would be made to protect subsale, I beg to ask leave to withdraw the amendment.
Amendment, by leave withdrawn.
Mr. Flight: I beg to move amendment No. 172, in page 90, line 23, leave out 'the consideration' and insert
'so much of the consideration as is attributable to the estate or interest in land'.
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The Chairman: With this it will be convenient to take Government amendment No. 247, in page 90, line 26, after 'value,' insert
'of the consideration attributable to land in the United Kingdom'.
Mr. Flight: Without revisiting the territory, amendment No. 172 would specifically ensure that the clause applies only to sales of land of more than £10 million, and not to land sales that are only a small part of the transaction that exceeds that amount. The Law Society raised that point.
Press releases on the Budget indicated that the new charge would apply only where the consideration for the land concerned was in excess of £10 million. However, the legislation goes beyond that. The effect of the clause will be that an agreement on the sale of a business with non-land assets of £9 million and land assets of £2 million will be subject to stamp duty as though it were a conveyance on the sale; because the agreement would be for the sale of an interest in land, together with other assets, the instrument would form part of a transaction in which the value exceeded £10 million. I do not believe that that was the Government's intention; it is certainly not what they said that they would do, which is the reason for the amendment. Perhaps Government amendment No. 247 covers the same point. I look forward to the Financial Secretary's response.
Ruth Kelly: It is unusual in forums such as this for the Government to recognise the case made by the Opposition. I am delighted to say that the case put forward by the hon. Member for Arundel and South Downs was indeed persuasive.
The Government intended clause 113 to apply only to contracts where the consideration of the land and building exceeded £10 million. I therefore recommend that the Committee accept the amendment. For the sake of completeness, I should like the Committee to accept Government amendment No. 247, which ensures that the effect of the amendment No. 172 is carried through the rest of clause 113.
Mr. John Bercow (Buckingham): This is a memorable occasion, the significance of which none of us on the Committee should understate. I am conscious that celebrated members of the Committee have considerable experience of earlier Finance Bills. There is very little new in government, and much continuity, so I do not wish to exaggerate the case. Neither, however, do I wish the extent of the achievement of my hon. Friend the Member for Arundel and South Downs to be understated. In that context, is the Financial Secretary aware of the most recent precedent for his achievement?
Ruth Kelly: I thank the hon. Gentleman for his contribution. While it is unusual for the Government to recognise the case made by the Opposition, I think that the hon. Gentleman now realises that that is not unique. An Opposition amendment was indeed accepted only recently, during the course of this Finance Bill. On the grounds that I have set out, I encourage the Committee to accept the Opposition amendment and Government amendment No. 247.
Mr. Flight: Which does what?
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Ruth Kelly: It extends the hon. Gentleman's point through the entirety of the clause.
Mr. Flight: What can I say? Many thanks. I am pleased that this important point has been taken on board. Without banging on about it, I think that the whole territory of changing stamp duty is quite tricky. When we debated other clauses our points, although comprehensive, were not always accepted. I am pleased that the Government have seen the point here.
Amendment agreed to.
Amendment made: No. 247, in page 90, line 26, after ''value'', insert—
''of the consideration attributable to land in the United Kingdom''.—[Ruth Kelly.]
Clause 113, as amended, ordered to stand part of the Bill.
Abolition of duty on instruments relating to goodwill
Mr. Flight: I beg to move amendment No. 173, in page 91, line 33, at end insert—
''or ordinary trade debts as defined in paragraph 35(5) of Schedule 16''.
What we have learnt is that goodwill is good and property is bad, but we welcome the abolition of duty on goodwill and the announcement that property other than securities and land will be exempt from stamp duty towards the end of 2003. That policy decision having been taken, we ask why the assets that can now easily be taken out of the net of stamp duty should not be taken out now, instead of after a delay of over a year. In particular, the clause effectively recommends that the transfer of book debts should be immediately exempt from duty. A suitable definition of ''book debts'' can be found in paragraph 35(5) of schedule 16. The essence of the point is, why not introduce that measure now?
Ruth Kelly: Under clause 114, stamp duty charges on transfers of goodwill are abolished with effect from 23 April 2002. That puts goodwill into the system used with intellectual property, which we exempted from stamp duty in the Finance Act 2000. The goodwill exemption benefits businesses by removing the stamp duty charge when they are bought and sold. I am glad that the hon. Gentleman recognises the strength of the case that we are making for that exemption. The measure is a response to representations, both concerning stamp duty and following a wider consultation on corporation tax on intellectual property, goodwill and other intangibles.
As we announced when consulting on stamp duty modernisation, we intend to revise the scope of stamp duty in future so that it focuses on interests in land and excludes not only intellectual property and goodwill but receivables. We therefore understand the case for the exclusion of debt, partially covered by the amendment, but we intend to do that in a proper and coherent fashion in the context of a full examination of the scope of stamp duty under modernisation.
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The amendment is incomplete in what it would achieve, seeking as it does to exempt ordinary trade debt but not receivables in a wider sense; for instance, packages of debt used to underpin an issue of bonds. The definition of ''ordinary trade debt'' in schedule 16 is not suitable for our purposes, as we intend to deal with debt more broadly. The wider exemption of receivables will be achieved most appropriately by giving all types of debt our full consideration, with reference to the revised scope of stamp duty under modernisation. Therefore, I urge the hon. Gentleman to consider withdrawing his amendment.
Mr. Flight: I would have liked the Financial Secretary to address the debt issue a little more than she did. We are pleased by the general thrust of clause 114. There is a technical matter that might better be pursued later, and perhaps the Law Society's concerns are not correct; therefore, I do not want to put the amendment to a vote. I am not entirely happy that my point has been fully resolved but, in the light of what the Financial Secretary has said and further discussion, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 114 ordered to stand part of the Bill.
Schedule 36 agreed to.
IHT: rate bands
Question proposed, That the clause stand part of the Bill.
Mr. Michael Jack (Fylde): I rise to ask the Financial Secretary some questions about current Government thinking on inheritance tax. I am delighted that the Government have proceeded on the basis of indexing inheritance tax rates. Others who contribute to the discussion may give more information on the effect on the private estates of individuals who have modest means, other than the fact that they live in London or the south-east. Such individuals may find that they creep—or march headlong—into inheritance tax as a result of the rapid rise in house prices that has occurred in this part of the world recently.
That brings me to my first question. We have not had in the House of Commons for some considerable time a proper debate about the effect and, if I may say it from the Back Benches, the legitimacy of inheritance tax. The Government will, no doubt, invite us to agree to the enhanced limit of £250,000. Why do they think that that is the right figure, bearing in mind the point that I have just made? A property owned by someone who lives in a modest Georgian terraced house in London SE11—the London borough of Lambeth, which is not known for its property activities—could well be worth two or even three times the amount that is currently allowed under inheritance tax. That is not a fault of the individual who lives in such a property but is a consequence of the marketplace.
Mr. Bercow: I appreciate the potency of my right hon. Friend's example. May I offer him another, as he
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develops his argument? Does he agree that the trap would also apply to someone who owns a one-bedroom flat in the London borough of Westminster? Several Members of Parliament from all parts of the House would fall into that category. In that context, it is only right that I declare an interest, as I own a two-bedroom flat in Westminster. Does my right hon. Friend agree that neither of us could automatically be considered wealthy in any sense?
Mr. Jack: I take my hon. Friend's point. That raises the interesting issue of whether people who earn just over double the national average wage now could later find themselves in the realm of inheritance tax. The reason I mention that and the reason why I put it in the terms that I did at the start of my remarks is that this tax is a hangover from the days when taxes on incomes were sparse and taxes on capital were the way that the Inland Revenue got at people's income, which was bound up in assets. That is also the historical background of stamp duty. It was only at the point at which an asset was realised that the Revenue could find a way of getting a share of an individual's income.
Those days are gone and individuals are now taxed in many different ways. People of modest means, such as those described by my hon. Friend the Member for Buckingham (Mr. Bercow), could accumulate the wealth that now would ultimately be subject to inheritance tax—notwithstanding the increase to £250,000—through, for example, paying a mortgage over 25 years out of their already taxed income. They now pay such mortgages without the benefit of mortgage interest relief at source.
Income that has already been taxed once is effectively taxed again in this context. Wealth in an estate could also have been accumulated through wise savings or investment. No post-war Government have disagreed with that; in fact, they have all encouraged people to save. The current Government have had mixed or negative success in that respect, whereas the previous Government were rather better at it. Either way—