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New Clause—(Deduction In Respect Of Certain Subscriptions)

Volume 390: debated on Thursday 3 June 1943

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Rules 9 and 10 relating to Schedule E of the Income Tax Act, 1918, shall be construed as providing that any amount (not exceeding £15 in the aggregate in any year) paid by any person by way of subscription to any institution or other body which is, in the opinion of the Treasury, conducted wholly or mainly for the advancement of any branch of learning, science or technology and not operating for profit, may be deducted from the salary, fees or emoluments to be assessed in respect of such person.—[ Mr. Linstead.]

Brought up, and read the First time.

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

The object of this Clause is to repair an anomaly in the present law which bears rather hardly on certain of those who practise various branches of learning, science or technology. I can best illustrate the anomaly by referring very briefly to a distinction which the present law makes between scientific men who are practising their profession independently and scientific men who are practising their profession as employees. In the first case, the man who is carrying on some branch of science as a profession is, of count, assessed under Schedule D as a person who is carrying on a profession, whereas the employee is assessed under Schedule E as holding an office or employment. The independent professional man is entitled to deduct for Income Tax purposes any annual subscription to a scientific body which gives the right to use a qualification. No such concession is allowed to the scientific man who is employed, unless it is a condition of his employment that he should belong to that particular scientific society.

The anomaly, I think, can best be illustrated if one takes the case of a public analyst. Supposing there was an analytical chemist practising on his own account, who was also a part-time analyst to a city or county or borough. He would be entitled to deduct his subscription, for example, to the Institute of Chemistry or the Chemical Society because that is a subscription to a society giving the right to use a qualification. But if the same man were a borough analyst full-time and, consequently, an employee he would not be entitled to deduct subscriptions to those scientific bodies unless he had been able to persuade his employing local authority to make membership of those bodies a condition of his employment. This encourages attempts to escape the provisions of the law by employees who try to persuade the local authority, or whoever employs them, to impose membership of scientific societies as a condition of their employment. That is extremely clumsy and extremely inequitable because many employers naturally hesitate to assist in what they believe is an evasion of the law.

One recognises that the Treasury's duty is to safeguard the revenue, and I can well imagine that the Chancellor may say to us, "If I begin to make this concession in the case of a certain group of people—those who are practising science—I shall have a very large number of applications from other groups in the community for similar concessions." He may also say that it is difficult for the Treasury to decide which subscriptions to which societies should be entitled to this exemption. I think the answer to both those objections would be that there is in existence to-day for the use of Income Tax inspectors a list of societies, the subscriptions to which are allowed when the professional man is working on his own account, and that list of societies would be available if the same concession were to be extended to the man working as an employee.

One does not want, in dealing with financial matters, to appeal ad misericordiam. It is the duty of the Chancellor to harden his heart but nevertheless—[Interruption.]—we will see if we can bring about a chemical transformation of the Chancellor's heart and get it a little softer. The point I wish to make is that, generally speaking, the employees, the people who would benefit from this concession, are the more lowly paid scientific personnel. It is extremely difficult for a young graduate of a university who may be receiving £5, £6 or £7 a week to join the various scientific societies he would like to join, and which he ought to be encouraged to join, when the subscriptions may total £8 or £9 a year. The older man working on his own account will be able to afford them but the young man, who is full of enthusiasm and is mostly likely to benefit from the research work of scientific institutions, finds it most difficult to pay the subscriptions.

This is really part of a larger question. This war has been described as a scientists' war, and when it is over we are going to have a scientists' peace. In other words, there will be a colossal amount of work for scientific personnel to undertake. We have had the example of pre-war Germany, which was able to integrate all its scientific elements—universities, technical schools and industry. After this war we want to see a similar thing happen here, with every encouragement given to scientific people to join the appropriate professional scientific bodies. I am sure that any concession the Chancellor might be prepared to make would be amply repaid in the dividends, which would be forthcoming for the nation as a result of the encouragement it would give to science and scientific people.

The plea that has been made by my hon. Friend ought, I think, to commend itself to the Committee. I do not know whether he can accomplish the miracle he set out to do, because the softening of the heart of a Chancellor of the Exchequer on the occasion of a Finance Bill is as rare an event as the liquefaction of the blood of St. Januarius. [Interruption.] Well, perhaps it occurs occasionally. This is a small concession to ask for from the point of view of the nation, but a large concession from the point of view of a great number of public servants—as I think they are, in the widest sense of the term—who are giving their services for very small salaries, in research in connection with industry, in other forms of research, and in the technical branches of all the most important industries in the country. It is in the national interest that they should keep abreast of the times, and that they should be able to interchange their experiences and knowledge with their colleagues In other firms, universities, and institutes. Unless they are able to be members of these scientific societies, that is extremely difficult. We all know that the Chancellor of the Exchequer wishes to encourage the advancement of science and its application to industry, and this is one way in which he could give encouragement of that kind, at very little cost to the State.

As the law stands, it is possible for a professional scientific worker, working on his own account, to certify in his returns certain subscriptions to scientific societies as being essential to his work, and to get an allowance for them; but if he is working for a firm, he depends on that firm being willing to make such a certification. The managing director may take a narrow view, and may not realise the great importance of the man continuing as a member of the scientific or professional society in which he wishes to continue membership; and so he may not certify. Then there may be natural reluctance to ask the heads of a firm for a certificate of this kind. It is not fair that there should be such a disparity between a scientific worker who is working on his own account and another who is in the employment of a large firm or of some university. Again, it is important that those who are working as members of university staffs or in research laboratories not connected with industry should be encouraged and helped to continue in membership of societies which they have already joined, or of which it is necessary for them to be members. It is deplorable that so many of our scientific men, especially those engaged in research, should be so badly paid. Their salaries are in most cases far lower, than would be the case if they were employed in corresponding work in the United States. They have to meet these charges from a very modest income. In this country we do far less than is done in the United States to encourage technical and scientific research. Here is a practical way of giving such encouragement. I earnestly hope that the Chancellor of the Exchequer will be willing to accept the principle of the Clause.

I would like to congratulate my hon. Friend the Member for Putney (Mr. Linstead) upon the way in which he presented his case for this Clause, although I am afraid he may not have effected what he hoped. It is true that this raises a problem, but it is part of a wider problem. As my hon. Friend pointed out, there is, from a certain point of view, a difference between the criterion applying to a professional man who is working on his own, and who may make nothing, and that applying to the professional man who is employed, and who gets a fixed salary. The man who is employed and gets a fixed salary, if he wishes to deduct such a payment, whether it is a subscrip- tion to a society or anything else, has to show that that expenditure is necessary for the purposes of his employment. That is a narrower test than that which applies when he is working on his own, and has to show that it is necessary for the purposes of his activities. I do not want to be technical—nobody ever does—in tying people down to the words on the Order Paper, but the Clause is quite unrestrictive. It might enable me, for instance, to deduct a subscription to an archaeological society. It does not relate the society to the employment in any way. I do not think that that is due to inadvertence, but to the difficulty of doing so. This point has been considered from time to time: it has Come before the Courts and it is realised that it raises a great difficulty as to where you are to draw the line. That is the point. One of the learned judges who decided a case on this question—obviously rather a hard case—relating to a medical officer of health who subscribed to some society, said:

"I think that all subscriptions to professional societies and all taking in of professional literature and all that sort of expense which enables a man to keep himself fit for what be is doing are things which can none of them be allowed. If they were allowed every professional man would say, I have to belong to this society and I have to belong to that society; I have to take in this publication and I have to take in that publication and to do all sorts of things, and there would be no end to it."
I think that if there were cases where you could draw a satisfactory line, we would be glad to do it, but you cannot. The subscription to a learned society is only one example of the type of expenditure which a scientific man who is in salaried employment will experience. There is the buying of text books for keeping himself up-to-date. In some walks of life it can get further away. There is the schoolmasters' travelling; he may do it, in part at any rate, to keep himself fit for the work he has to do. Take the case of a don at a university. It is obviously desirable that he should spend part of his emoluments in entertaining, in having to tea and so on, some of the students under his care. Obviously that is not the kind of thing he could deduct for Income Tax purposes. I appreciate what the hon. Member for the Combined English Universities (Mr. Harvey) has said, and that it is not always easy for the man to go to his employers. The proper solution is, of course, that those who employ professional men, scientists, schoolmasters, and so on should pay them a salary which enables them to keep themselves fit for their employment, by subscriptions to learned societies, by buying books, by travelling, by entertaining the parents of their scholars, and so on. If the expense is necessary and cannot be deducted, and if it is an undue burden, the proper thing is for representations to be made by those who are interested, or by the organisations dealing with that side of the lives of the people concerned, to see that they get salaries which enable them to keep themselves fit for their employment.

I am not entirely convinced by the answer of the learned Attorney-General. I understood that there is a list, prepared by the Income Tax authorities, used for the purposes of Schedule D, and, if so, why is it not possible to use the same list for this purpose under Schedule E? We are asking that exactly the same conditions should apply to those who are under Schedule E.

It really is different. A Schedule D man may get nothing at all. A Schedule E man gets a fixed salary, and a Schedule D man may get nothing unless he makes a profit, which is to some extent a check on expenditure on this account whether made in respect of learned societies or on other purposes. That is the reason why under the Income Tax law the man who gets a fixed salary has to show that it is necessary, and for the man who is on his own and may make nothing in a particular year it is sufficient to say that it is for the purpose. Once you extend the principles to the man with a fixed salary—and the quotation of the learned judge supports it from that angle—it is extremely difficult to draw the line.

Will my right hon. and learned Friend give me some free advice on a matter in which I am personally interested? On Monday I was present at a board meeting of an engineering company when we discussed the question of whether we should encourage the technical members of the staff to join scientific and learned institutions in order to keep themselves up-to-date. Such a process would be to the advantage of the company in the long run, and we were speculating as to what our position would be as a company if we paid the subscriptions of employees to scientific institutions and whether that would be a taxable expense. It is not the narrow interest with which I am dealing but the larger interest. It is a good thing to encourage people to get into touch with the various technical societies, and the more people belong to them the better. It does not merely give them status by having letters after their name, but it gives them access to literature and the opportunity to attend important discussions. It is vitally important to enable those engaged in scientific occupations to keep abreast of the times, and would my right hon. and learned Friend oblige me by saying what is the position of the employer who decides to pay his employees' contributions to such a society? Can the employer treat it as a working expense of the business?

If that question had been asked at Question time, I would have said that I would like to see it on the Paper, but if my hon. Friend will write to my right hon. Friend, I have no doubt that he will assist him if he can.

Perhaps when the right hon. and learned Gentleman is examining this correspondence he will also examine whether contributions of members to trade unions can be so treated.

I still maintain the opinion that we have here an anomaly which ought to be removed, and with every respect to the learned Attorney-General I find very little justification for the Treasury not taking some action in what he has told us. He has indicated all the difficulties which might arise if you apply to Schedule E the conditions that at present apply to Schedule D, but he did not explain to us how it was these difficulties have not arisen in so far as at present the Schedule D men get the benefit of this exemption. I did not find, to my regret, that he was very convincing, but he conjured up imaginary difficulties, when, in present circumstances, such difficulties cannot arise. We shall have to plug away at this. I am certain that it is something which ought to be put right, but obviously at the moment there is nothing to be gained by taking the matter further, and I therefore beg to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.