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New Clause—(Adjustment Of Rights Between Seller And Buyer Under Certain Sales Of Electric And Gas Appliances)

Volume 439: debated on Wednesday 9 July 1947

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"Whereas on the fifteenth day of April, nineteen hundred and forty-seven, a Resolution was passed by the Committee of Ways and Means of the House of Commons providing for the charge of purchase tax as from the following day on all domestic appliances and domestice apparatus being appliances and apparatus of a kind suitable for operation from electric or gas mains (subject to an exception for lighting and wireless appliances and apparatus, gramophones, and player pianos, clocks and parts of clocks, warming pads and blankets, hair drying machines, and infra-red and ultra violet ray lamps and radiant heat lamps) at a rate equal to two-thirds of the value of the goods (except in the case of any of them being of classes subject to tax at the higher rate):

And whereas, of the goods as to which that provision for charge at the said two-thirds rate was made, those falling within the Third Schedule to this Act are by this Act rendered chargeable to tax at that rate, but the remainder (in this section referred to as goods to which this section applies) are as respects tax unaffected by the passing of this Act:
Now, therefore—
  • (a) where goods of any description to which this section applies have been sold in the course of any business under a purchase made after the date of the passing of the said Resolution and before the passing of this Act at a price exceeding that at which, in the ordinary course of that business, goods of that description similar to those goods were sold or offered for sale immediately before that date, the buyer shall be entitled to recover an amount equal to the excess from the seller as money received by him for the use of the buyer, except in so far as the seller proves that the excess was included in the price by reference to matters other than any prospective liability or increased liability of his under any of the enactments relating to purchase tax arising from the charge provided for by the said Resolution, or any increase in the price charged on a purchase of the goods made by him after the date of the passing of the said Resolution attributable to any such prospective liability or increased liability of any other person;
  • (b)where, in respect of any goods to which this section applies sold under a purchase made on or before the date of the passing of the said Resolution and delivered under the purchase after that date and before the passing of this Act, the seller has recovered from the buyer, as an addition to the price, any sum fixed by reference to any such prospective liability or increased liability as aforesaid, the buyer shall be entitled to recover that sum from the seller as money received by him for the use of the buyer."—[The Solicitor-General.]
  • Brought up, and read the First time.

    11.15 p.m.

    I beg to move, "That the Clause be read a Second time."

    This Clause is designed to deal with the case where, because of the Financial Resolution which paved the way for the 66⅔ per cent. tax for domestic appliances suitable for operation from gas mains or electrical mains, the seller has increased his price in anticipation of including the amount of anticipated tax. What the new Clause seeks to do is to say that where, after the Financial Resolution, and before the date of the coming into force of this Bill, a sale took place of an article covered by the Resolution that has not been made subject to the higher rate of tax by virtue of the Amendment to the Third Schedule we have moved, if the seller has included the tax in his price, the buyer can recover it from him. What is likely to happen is this. The Financial Resolution was, of course, general in its terms and covered all domestic appliances suitable for operation from electric mains and gas mains. The Amendment which we have passed and which the House has approved limited that increase to the 66⅔ Purchase Tax items, that is, to space heaters and water heaters. So that a great many of the articles which any trader would have anticipated to be qualified for the higher rate of tax by the Financial Resolution turn out not to qualify for that higher rate, but to remain at the original rate of tax. Any prudent trader hearing of the Financial Resolution, would naturally increase his price to the seller by including in the amount of his, price what he thought he would have to pay by way of tax. It now turns out, except in respect of those things still on the 66⅔ tax, that he will not have to pay at the increased price. It is only fair that the buyer, to whom he had charged the increased price, should be entitled to recover from the seller the increase attributable to the amount of the tax the seller thought he would have to pay.

    What the new Clause does is to say that where the seller increased his price and the sale took place after the Financial Resolution, but before the Bill comes into force, the buyer can recover that increase from the seller, unless' the seller can show that he increased his price without reference to the cost of any anticipated increase in the tax he thought he was going to have to pay. If the seller can show that he increased his price beyond what he was accustomed to selling at before, and without reference to the tax, but owing to some completely extraneous circumstances, and that the increased price was not attributable to the tax at all then the buyer cannot recover that increase from the seller. But where the increase is due to the fact that the seller thought he would have to pay more tax, which it turns out he has not to pay, the buyer is given the right to recover that amount from him. This is obviously a measure of justice, and it is to adjust a position which the Clause, by adjusting in that particular respect, prevents the buyer from being charged for a tax which in point of fact, because of the Amendment, was never imposed on the seller.

    I notice that the apparatus concerned here is apparatus worked from gas mains. Does the new Clause also apply to calor gas apparatus?

    It applies to all goods which the Financial Resolution covered, but which have since been taken out of the scope of 66|rds per cent. tax. Whatever comes out as a result of the Amendments whch we have made to the Third Schedule—all those goods which are taken out and which therefore do not qualify for the increased rate of taxation—all those goods are goods in respect of which the power is given to recover the increase from the seller.

    I feel that the buyers of these types of apparatus will probably be very grateful for the introduction of this new Clause which certainly will help in a considerable number of cases; but, of course, there will remain considerable difficulty in applying it where cash transactions have taken place. For instance, in electricity showrooms people frequently come and buy apparatus and pay cash for it and go off, so that there is nothing but a cash transaction recorded and no record of the name of the purchaser. I imagine that that will be the case in a great many shops. But where the transaction can be traced, this will certainly be an effective measure.

    May I put this point to the hon. and learned Solicitor-General? It may be that in explaining the Clause he included a slight inaccuracy in order to shorten his explanation but I think that in describing the case where the duty can be recovered he said "unless the seller proves" something. But that is not what the Clause says. It is not "unless"; it is "except in so far as," and that seems to me to mean that in certain cases the whole of the difference may be recovered from the seller, and in other cases part only. If I am right that that is the meaning of the Clause, then there are complications of working which are extremely grave. The purchaser will not know whether he can recover all or part only and, if so, what part. I should be very grateful if the hon. and learned Gentleman would say whether I am right in my understanding —that the words are deliberately not "unless" but "except in so far as", and, if I am right, how the purchaser can possibly ascertain what he is entitled to recover.

    Both hon. Gentlemen who have spoken dealt with the same point, if I may say so with respect. The question was whether this is workable. The hon. and learned Gentleman is saying that the words are "except in so far as." There certainly has to be an allocation, there has to be an appropriation. Now, the question as to the practicability of the scheme was most carefully considered and fully discussed, and we came to the conclusion, after full consideration, that it would work. What the hon. Member for Stockport (Sir A. Gridley) says, in the case of the more expensive type of article where the transaction is reasonably well documented, is that there should not be any difficulty. He has the greatest experience in these matters and the House will pay great attention to what he says on it. What was felt with respect to the less expensive type of article was that there should not be really any difficulty.

    There were considerable stocks on hand of the less expensive types of articles to which this tax would not be attracted and it was thought justifiable to adopt this comparatively simple scheme because, in the actual circumstances, it was felt that it would work. Most of the cases to which it would have to apply would be the more expensive type of article as to which it would be quite easy, by ordinary documents and records for the purposes of the sale, for the buyer to satisfy the seller as to the sale and for both parties to ascertain how far, if at all, there was an increase of price which was covered by the Clause. I can only say that the question of the actual workability of the scheme has been gone into, and the conclusion was reached that it will work; and it is for that reason that we have adopted this particular form of Clause.

    Will the Government make up their minds what tax they are going to put on these articles? The public keep ringing up and writing to Members of Parliament to ask if there is a tax on certain domestic articles, and whether it is at the rate of 33⅓ or 66f, and no one knows where he stands in answering these questions. The whole thing is a complete muddle. Will the Government give out some statement on what is their policy and what they are going to do about Purchase Tax? It is intolerable for the householder, who cannot keep himself informed of what is going on. They are told that the Government have taken the tax off all electrical apparatus for the household, and then suddenly it is put on again. The same applies to motorcars. No one knows what is the Purchase Tax on anything at all. I hope the Government will clarify the situation a little more.

    I sympathise with the previous speaker when he says he is puzzled to know at what rate the tax on various things stands at at present. The only other observation I would like to make is that, of course, we are going to support the Chancellor of the Exchequer's Clause, although it seems to me rather clear that it may give rise to a certain amount of litigation. Perhaps the Solicitor-General will tell us whether he thinks this is so or not. The real point I want to make is that this illustrates the immense amount of trouble caused by these ill-considered proposals which the Chancellor of the Exchequer brings forward and then abandons. Next time, I hope he will think over any proposal more thoroughly.

    Question put, and agreed to

    Clause read a Second time, and added to the Bill.