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New Clause—(Exemptions From Charge To Tax Under The Preceding Section)

Volume 439: debated on Wednesday 9 July 1947

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(1) The following payments shall be exempted from the operation of Subsection (1) of the last preceding Section, that is to say—

  • (a) payments made pursuant to a statutory superannuation scheme, or made to a superannuation fund approved (whether in whole or in part) by the Commissioners of Inland Revenue for the purposes of Section thirty-two of the Finance Act, 1921;
  • (b) payments made pursuant to an excepted provident fund or staff assurance scheme or other similar scheme (as defined in the last of the Sections of this Act relating to retirement or other benefits);
  • (c) payments made by way of premium pursuant to a scheme the benefits Where-under are secured by premiums payable by the body corporate, with or without contributions by the directors or employees affected, under life or endowment assurance or life annuity contracts, being a scheme which was in operation before the sixth day of April, nineteen hundred and forty-seven, and which is not confined, or substantially confined, to directors and persons, who, not being directors, are remunerated at a rate exceeding two thousand pounds a year or to directors or to such persons.
  • (2) Neither Subsection (1) nor Subsection (2) of the last preceding Section shall apply so as to cause any sum to be deemed to be income as therein mentioned where the retirement benefits scheme in question is one under which the main benefit afforded to each of the persons to whom the scheme relates is the provision for him of a pension or annuity for his life, and either—

  • (a) that scheme was in operation before the sixth day of April, nineteen hundred and forty-four; or
  • (b) that scheme is for the time being approved by the said Commissioners under the next succeeding Section.
  • (3) Where in respect of the provision for a director or employee of any future retirement or other benefits a sum has been deemed to be income of his by virtue either of Subsection (1) or of Subsection (2) of the last preceding Section, and subsequently the director or employee proves to the satisfaction of the said Commissioners that no payment in respect of, or in substitution for, the benefits has been made and that some event has occurred by reason whereof no such payment will be made, and claims relief under this Subsection within three years from the time when that event occurred, they shall give relief in respect of tax on that sum by repayment or other wise as may be appropriate; and if the director or employee satisfies the said Commissioners as aforesaid in relation to some particular part of the benefits but not the whole thereof, they may give such relief as may seem to them just and reasonable.

    (4) Where apart from this Subsection any sum would be deemed, by virtue either of Subsection (1) or of Subsection (2) of the last preceding Section, to be income of an employee for any year of assessment, but, by reason of his exercising his employment outside the United Kingdom he is not assessable to income tax under Schedule E in respect of the emoluments of his employment for that year, that Subsection shall not apply so as to cause that sum to be deemed to be income of his for that year.—[ The Solicitor-General.]

    Brought up, and read the First time.

    I have two small questions to ask on this Clause. The first relates to Subsection 1 (1, b). Where a provident fund has been approved, will the employee get Income Tax relief for his contributions to that fund in the same way as he gets Income Tax relief to a superannuation scheme under Section 32 of the 1918 Act? The second question I have to ask concerns Subsection (4) which I understand we owe to the hon. and learned Member for East Leicester (Mr. Donovan). I ask him if he will support me in asking for a widening of that Subsection. As it stands, it covers only nonresident employees. It does not seem fair that it should not cover non-resident directors. I am particularly thinking of a case of a mine manager who has worked in a mine overseas and who knows that when he has done a few years service abroad he will be put on a board. The definition of director includes a man who is to be a director. That is a very common thing, when a man serving abroad knows that after an arduous time. in a foreign country he will go on a board. Would it not be reasonable to widen this Subsection to include that case? Mention has been made about Indian employees and I think these people are just as important.

    We feel we have drawn the line fairly in excluding the employee. After all, it is the employee who is the. static person generally. The directors move about more and we feel it would not be right to ask us to go further than we have done in that Subsection. With regard to the provident scheme, in the case of those we exempt, we do not affect them at all. With regard to the payments of the employer towards the provident fund, they do not qualify by way of deduction as payment to the employee unless the provident fund can be said to come within the scope either of those which are statutory superannuation schemes or schemes approved under Section 32 of the 1921 Act. We leave the small provident schemes in the same position as they were before the Act.

    May I respond to the invitation of the hon. Member for Chippenham (Mr. Eccles). The reason why directors are not included in Subsection (4) is a rather technical one. It is that directors, although they may do all their work outside the United Kingdom provided they are directors of an English company, are assessable under Schedule E although they reside and work outside this country. There was an occasion when I took the opposite view, but I failed to persuade the House of Lords to let these directors off. That is the reason why directors are not in the Subsection.

    Question put, and agreed to.

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