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New Clause—(Computation Of Profits)

Volume 155: debated on Wednesday 28 June 1922

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Where in any year of assessment any profits or income in respect of which a person has been charged or is chargeable under Case III of Schedule D finally cease to arise to that person he shall, if he so elect, be charged for that year on the amount of the profits or income of that year, and if the tax charged has been paid, any amount overpaid shall be repaid.—[Mt. G. Locker-Lampson.]

Brought up, and read the First time.

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

This new Clause touches the cases of people who have got War Loan, and where the tax is not deducted at the source. The House of Lords the other day, in a case between the National Provident Institution and the Inland Revenue, ruled that when a, man had War Loan, and sold out part of that War Loan, and then, perhaps, sold out the whole of it, in the last year when he got no interest at all he should not have to pay Income Tax on the previous year's assessment. Therefore the Chancellor of the Exchequer has now brought in his Clause 11 to meet that point. Clause 11 says that if you buy War Loan in the first year, when you have only received part of the interest, you shall pay on the actual year's income, but that thereafter, except perhaps for the first two or three years, you shall pay on the actual income. I maintain that that acts very unfairly in a great many cases. Supposing a man has £1,000 War Loan at 5 per cent., and supposing that in the first year he gets £25 income, in the following three years he gets a full income of £50, and in the last year, when he sells out, he gets only £20 a year. If you add that up, you find that the interest he has received amounts all together to £195, but under the right hon. Gentleman's Bill he pays on £295. That, is to say, he pays on a good deal more income than he receives.

That point is perfectly easily remedied if the Chancellor of the Exchequer will say that not only shall the man pay on his actual income in the first year when he buys War Loan, but that he shall also pay on his actual income at the end of the period, when he is selling out War Loan, because the Bill puts it on a perfectly fair basis so far as the beginning of the term is concerned, but leaves it in a very unfair position at the end of the term, when possibly he sells all his War Loan. I think the answer probably will be that the Inland Revenue is already able to deal with that point by way of concession. I do not know, but it is possible that the Inland Revenue occasionally deals with that point by way of concession, though I think it is very inadvisable that the rights of the taxpayer should depend on concessions given from time to time by the Inland Revenue. I think it should be made a statutory right of the taxpayer in every case, and that the right should not depend on a concession given by the Inland Revenue. I have been talking lately to one of the greatest authorities on Income. Tax in this country, and he tells me that he does not suppose there is one man in 10,000 who knows what these concessions are. They are concessions which are based upon instructions sent out by the Inland Revenue, and then passed on to the various Inland Revenue officials. Very often the officials do not know what they are, and it is never found out that a particular taxpayer should have this particular concession. Therefore, I would suggest, not only that my right hon. Friend, if he can, should accept this new Clause, but I do suggest that all these concessions should be put into an Act of Parliament, so that the taxpayer should know what his statutory rights are, and that his rights should no longer merely depend on some haphazard concession of the Inland Revenue.

May I make a preliminary remark on the subject of concessions? That does not arise on this Clause at all, because the case is met under the existing law, not by concession at all, but by an adjustment, to which the taxpayer has a statutory right, agree with the general principle that extra-legal concessions are a bad system, and I have said so more than once during the discussion on this Finance Bill. I leave that subject, because it does not arise on the Amendment. With regard to the new Clause, the type of income which is mainly concerned, I think, is the different War Loans, and the point, as I understand it, is this: The provision of the Clause in the. Bill is that, after the second year, the taxpayer is assessed on the previous year's receipts. The Mover of the new Clause makes no complaint about the basis of assessment in the first year, or the second year, but his attention is directed to the last of the series of years. If a man sells out during the last year, before the end of the year, his receipts from his War Loan securities will be less than a whole year's income from those securities. If he has held them during the previous year he will be assessed on the receipts of the previous year ex hypothesi on the whole of the year's income upon those securities. It is said, and justly said, that if he had to pay the tax when he was receiving half the income from the securities as if he had received the whole of the income that would he unjust. I think I appreciate the point of the Amendment. The answer to it is this: that under the existing law there is in Miscellaneous Rules, under Schedule D, a rule (No. 3) which provides for the adjustment in the case so that the taxpayer does not pay in the last year on more than he has actually received.

Motion and Clause, by leave, withdrawn.

The next new Clause on the Order Paper in the name of the hon. Member for Wood Green (Mr. G. Locker-Lampson)—[Income Tax on employments, etc.]—imposes a charge, and is therefore not in order.

This is a very important matter. I do not know whether I can deal with it by altering it, as in the case of the last Amendment?

I am afraid not, as it appears to me that it would still impose a charge.