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Clause 24—(Payment Of Excess Profits Duty By Instalments)

Volume 155: debated on Wednesday 21 June 1922

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  • (1) Subject to the provisions of this Section the Commissioners of Inland Revenue may, on an application made in that behalf by any person by whom any Excess Profits Duty under the Finance (No. 2) Act, 1915 (in this part of this Act referred to as "the principal Act"), is payable, authorise the payment of the duty by means of quarterly instalments within the period of five years ending on the thirty-first day of December, nineteen hundred and twenty-six.
  • (2) The Commissioners of Inland Revenue may as a condition of granting an application under this Section require the applicant to give such security for the due payment of the instalments as they think fit, and may at their discretion at any time revoke any authorisation granted under this Section.
  • (3) If any person is aggrieved by the refusal of the Commissioners of Inland Revenue to grant an application made by him under this Section or by the revocation of an authorisation granted to him under this Section, he may at any time within fourteen days after the date on which notice is given to him by the Commissioners of the refusal or revocation, as the case may be, appeal against the refusal or revocation to the Special Commissioners of Income Tax and the decision of the Special Commissioners on the appeal shall be final. Any person intending to appeal to the Special Commissioners under the foregoing provision shall give notice of his intention to the Commissioners of Inland Revenue.
  • (4) Simple interest at the rate of five per cent. per annum, without deduction for Income Tax, shall be chargeable on Excess Profits Duty as from the date on which the duty becomes payable or in the case of duty which became payable on or before the first day of January, nineteen hundred and twenty-two, as from that date. Any such interest shall be payable in money and shall be recoverable as a debt due to His Majesty from the person by whom the duty in respect of which the interest is charged is payable.
  • (5) Any instalments of Excess Profits Duty and any interest on arrears of Excess Profits Duty payable by any person under this Section shall be paid on such dates as the Commissioners of Inland Revenue may fix.
  • (6) For the purposes of this Section, any reduction made after the first day of January, nineteen hundred and twenty-two, in the amount of an assessment to Excess Profits Duty shall, subject as hereinafter provided, be deemed to have been made as on that date or as on the date on which the duty under that assessment became payable, whichever date is the later: Provided that any reduction of the amount of duty payable, made in pursuance of the provisions of Part II or Part III of the Second Schedule to the Finance Act. 1921, shall have effect as from the thirty-first clay of August, nineteen hundred and twenty-three, and the thirty-first day of August, nineteen hundred and twenty-five, respectively, or from the date at which the claim under those provisions could have been proved, whichever is the earlier.
  • (7) In valuing any stock or bonds transferred in satisfaction of Excess Profits Duty under Section thirty-four of the Finance Act, 1917, no account shall be taken for the purpose of the deduction to be made under proviso (a) of Sub-section (4) of the said Section of any interest accruing due after the thirty-first day of December, nineteen hundred and twenty-one.
  • (8) For the purposes of this Section, Excess Profits Duty shall be deemed to become payable on the expiration of two months from the date on which the assessment to duty is made.
  • (9) This Section shall, subject to the necessary modifications, apply to munitions exchequer payments as it applies to Excess Profits Duty.
  • (10) This Section shall be deemed to have had effect as from the first day of January, nineteen hundred and twenty-two.
  • I beg to move, in Sub-section (1), to leave out the word "five" ["within the period of five years"], and to insert instead thereof the word "ten."

    This Amendment and the Amendment which follows it on the Paper go together, and, in effect, ask the Chancellor to give ten years for the payment of instalments instead of five. I am in entire sympathy and agreement with him in regard to fixing the rate of interest on arrears at such a rate as will encourage payment, and when I spoke in Committee of Ways and Means, I said I thought he would, as a result of the rate of interest, get more duty paid this year. But there are undoubtedly a large number of people who have so locked up their profits in new plant and machinery that they are finding difficulty now when trade is not going well. They cannot possibly pay the full amount that is due, and if trade revives they will be still more unable to pay, because they will require all the money they have got for the payment of wages and the purchase of raw material in order to get started again. Having regard to the fact that the Inland Revenue have the right to ask for security in such cases, I suggest that the right hon. Gentleman should allow the instalments to be spread over 10 years for the purpose of assisting businesses such as those to which I have referred.

    I am heartily in agreement with the last speaker. When I was ruled out of order just now, I was particularly concerned about mentioning the difficulties with which certain industries are faced. I am quite certain that in some trades and businesses there may be large sums of money in hand and it may be felt by the Inland Revenue Department that such money should be used for the purpose of paying taxation arrears, but the real trouble is that at the present moment many of these industries have nothing to do and every penny of their funds is required for the ordinary current running of the business. The matter is one which has come up at various boards in which I am interested, and we felt that, even with a higher rate of interest, it was better for us to take advantage of the deferred scheme than to put ourselves in such a position that when we get a revival of trade—as we hope to shortly—we should not be able to utilise all the money we have in the creation of employment. My right hon. Friend is anxious to assist us as much as possible. He will confer great benefit upon industry and give us something in the nature of encouragement if he accepts this Amendment and extends the period for 10 years. It means a great deal, because at present it requires a lot of courage to face even the ordinary business risks, and if we can get the sympathetic consideration of the Inland Revenue and the Chancellor, I am certain that industry as a whole will do everything possible to repay such consideration.

    I cordially support the Amendment. In the Midlands we have a very large number of small firms who have been very bard hit by the War and by circumstances arising out of the War. It would be a distinct advantage to those firms in connection with any development of trade which may take place in the near future, and it would help in extending and increasing their business efforts if this concession were made. I think the arguments submitted, à propos as they are of the whole country, ought to convince the Chancellor that he will do a very great service to industry if he meets us in this way. We know how much the Chancellor desires to help trade in this country. Every business man and business organisation is agreed that no Chancellor has been so willing to listen to practical and helpful suggestions from business men as the present Chancellor. Here is a case in which, by making a comparatively small concession, he can confer a great advantage on a very large number of small firms throughout the country.

    I could not altogether follow the last speaker in his remarks. He said he was particularly interested in the advancement of certain firms of small size in the Midlands which have been extremely hard hit by the War. I submit if firms have been hard hit by the War, there is very little Excess Profits Duty for them to pay. It is only those people who have benefited greatly out of the War who are called upon to pay this duty.

    I did not catch that, but I accept the statement of my hon. Friend. I hope in this matter the Chancellor will show his "Government whip," and will not give way to the cry which has been raised from the various vested interests so well represented in this House. From one's ordinary observation it would appear that the only concessions which the Chancellor has made during the Debate have been to those people who are always clamouring for some benefit. 1f the Chancellor were to stick to his ground on this occasion it would be for some succeeding Chancellor to review the position in a few years' time, and then, if it were found that the position fore- shadowed by the previous speakers existed in absolute fact, I am sure everyone would be prepared to support efforts for the relief of the industries to which these hon. Members have referred. At the present time, however, I hope the Chancellor will stand firm and retain the period of five years. At the expiration of five years the matter can be reviewed, and if the hardship really applies we will then be able to see what is the best thing to do.

    I hope the Chancellor will listen to those who are speaking in favour of the Amendment. I do not think it is generally known that there is a very close connection between this question of the instalments of taxation and the question of finding employment. I have known as an actual fact a case where the finances of a business were in such straitened circumstances, owing to the fact of having to pay instalments of taxation, that the only way in which they could pay was temporarily—for a few weeks—to shut down the business. That has happened in many cases, and it means that the fact of taxation having to be paid at a particular time, and to a particular extent, is the direct means of causing loss of employment which the firms concerned are exceedingly anxious to give.

    As one hon. Member said, I am most anxious to listen to the suggestions of the trading community on matters of this kind, and everyone is aware that great embarrassment is being caused at the present time. I am not convinced, however, that there would be any real gain derived from extending the period, and certainly 10 years is too long a period of time to allow for the payment of Excess Profits Duty, so far as present circumstances show. It may he that as time goes on the matter will become plainer, and it may be thought necessary to give a, further extension. In the meantime, I think it would be unwise to increase the period to any figure over five years, but I have got no very confident opinion upon that matter, and if my hon. Friend will allow me, I will consider the case further between now and the Report stage, and if I can see that there is really a sound foundation for what has been said in support of the Amendment, then I shall give it my attention.

    The Chancellor expresses the hope that between now and the Report stage he will consider the extension of the five years' period. Can he tell the Committee the amount of arrears of Excess Profits Duty at the beginning of the present financial year?

    It is a very large sum. I could not give the actual figure, but certainly it is a large sum, and I am sure my hon. Friend will make any use he likes of its size.

    I am trying to find out what effect an extension of the period will have on the revenue of the year. The Chancellor of the Exchequer expects to receive a sum of £30,000,000 odd from the Excess Profits Duty. If the five years' period were extended it would have some bearing on that revenue.

    My hon. Friend will remember that under present conditions the rate of interest which is being charged offers an inducement to the trader to pay rather than allow the arrears to stand.

    Amendment negatived.

    I beg to move, to leave out Sub-section (2).

    This Sub-section means that if a concession is granted to a debtor to the extent of his being allowed a certain period in which to pay his debt, the Inland Revenue authorities may require security and also may revoke any authorisation granted. I quite agree that the Commissioners of Inland Revenue, on behalf of His Majesty's Treasury, ought to have some earnest of good will, but this makes it a condition of granting an application. That officials who know their duty and who will, if it is necessary, take some sort of security, will go as if they were bailiffs in charge of the property. This puts a chain around the man's leg with the power in the hands of the Inland Revenue at any time to revoke his authorisation. It is holding a sword of Damocles over a man's head. I think we can, with some justice, ask the Chancellor of the Exchequer to modify that Sub-section, at any rate, by rendering it less easy for the Commissioners of Inland Revenue to revoke any authorisation which is granted under the Clause. Otherwise, the Clause may destroy a man's credit and may ultimately ruin him. It will certainly paralyse him and prevent him borrowing money from his bankers with which to buy raw materials for his business, and for that reason I would ask the right hon. Gentleman to give his attention to the effect of the power which the Commissioners have to revoke that authorisation. If he could see his way to soften that Clause down, I think he would be wiping away what might ultimately be. a great hardship.

    I am sure the hon. Member will readily agree that some power of this kind is necessary.

    I think he will also agree that it would not be in the interest of the Inland Revenue Department to exercise this power harshly, but the kind of case which he suggests, where the effect of revoking the power to pay by instalments might have a most detrimental effect on a man's credit, is the very kind of case in which the Inland Revenue Department would desire to avoid acting harshly.

    It might go further and result in the security being called in, in which case it might put the trader in a great difficulty.

    As I say, after all, there is no creditor which has so large an interest in the solvency of the man indebted for arrears of Excess Profits Duty as the Inland Revenue Department, and the whole tendency of that Department would, in such circumstances as the hon. Member has described, be rather to prevent anything happening which would injure the solvency of their debtor than that they should bring about circumstances in which he would be unable to pay any further instalments. Accordingly, I think the hon. Member may take it as a certainty that no harsh act would be likely to be taken by the Department under any power which they have got under this Sub-section. If, however, he can suggest any form of words at a later stage which would, as he says, soften this particular power, I shall be glad to consider them, and in the meantime I think he may assure himself that there will be no arbitrary or harsh exercise of that power on the part of the Inland Revenue Department.

    I accept the right hon. Gentleman's assurance. I might suggest some words which would compel the Inland Revenue Department to give three, six, or nine months' notice, or some notice, so that the, revocation should not take place in a hurry or in an arbitrary manner, in order to give the man at any rate some time in which to look round.

    Amendment negatived.

    I beg to move, in Subsection (4), after the word "duty" ["Excess Profits Duty"], to insert the words

    "to be paid by instalments under this Section."
    The Chancellor of the Exchequer agreed at the beginning of the year that he would allow those who could not pay Excess Profits Duty to pay it by instalments over a period of five years, and that he would charge 5 per cent. interest without deduction of tax, but he is doing something more. He is asking that, if a firm or company up to the present time had not yet been assessed to Excess Profits Duty for their final accounting period, owing to some difficulties on one side or the other, directly that assessment was made, even though the firm or company did not want to pay on the instalment system, he should take power to charge interest from the time the assessment was made. I do not think it is intended that after all these years of Excess Profits Duty people who do not want to take advantage of the instalment system should have to have interest accruing from the date on which the assessment is made against them, and my Amendment is to make it clear that this 5 per cent. interest is to be charged only in the case of firms who accept the offer of the Inland Revenue Department to pay their duty by instalments. The Chancellor of the Exchequer has in previous Acts got every remedy he wants against those who do not accept the instalments system and yet do not pay up their Excess Profits Duty.

    I confess that I was in some difficulty in appreciating the point of the Amendment until I heard the hon. Member's speech, and I now understand that what he wants is that since no interest has been charged on arrears of Excess Profits Duty in the past, upon people who have some difficulty in paying, it would be unfair now, in cases where assessment is only now being made, to charge them, as from the date the duty becomes payable, interest upon any arrears that may subsequently accrue. I appreciate the point. I cannot agree that there is a departure from the practice which has been pursued previously of doing nothing which in any way seems harsh in the way of urging payment upon people who are not in a position to pay, but, on the other hand, if interest is to be paid by those who are to pay by instalments, it is clear that it would be absurd to allow people who are not under the obligation to pay by instalments to get off paying interest altogether. The result of your action would be that nobody would choose to pay by instalments at all, and nobody would pay any interest.

    The right hon. Gentleman, under the 1915 Act, can step in at once in such a case as that. All I am trying to do is this. A man, to-morrow we will say, has his final accounting period settled and an assessment of £2,000 made against him. What I want is that if he pays the Chancellor in the ordinary way on the 1st August he shall not have a demand note for interest from the date at which the assessment is made up to the 1st August. if the Chancellor of the Exchequer finds on the 1st August that this man is not paying he can put the law into operation against him, and the man would either be compelled to accept the instalment system and pay interest or legal process could be issued against him in the usual way. I only want to protect the cases where assessments are now made and where a reasonable period may be given for payment before the Chancellor of the Exchequer acts.

    My hon. Friend's Amendment goes much further than the case he has just made, because it would really have the effect of making it incumbent only upon those who pay by instalments to pay interest as well. Obviously, that would be an error, but I am willing to consider what I can do to cover the case to which he has referred, where a person pays his Excess Profits Duty within a reasonable period after it has been assessed. Obviously, it would he a great concession to go further and to give an inducement to people not to enter into any arrangement about paying by instalments, because in that way they would escape the payment of interest.

    Amendment, by leave, withdrawn.

    Clause ordered to stand part of the Bill.

    CLAUSE 25 (Right of appeal as to amount of deficiencies or losses) ordered to stand part of the Bill.