HC Deb 08 June 1932 vol 266 cc2067-9

(1) Income arising from a studentship the holder whereof is required by the regulations governing the studentship to devote himself to research work as a term or condition of his tenure of the studentship and who is not a person, receiving full-time instruction as provided by Section twenty-eight, Sub-section (1) of the Finance Act, 1920, shall be chargeable to income tax under Schedule E, Income Tax Act, 1918, and rules applicable to that schedule.

(2) In this Section the expression "studentship" includes a fellowship, scholarship, exhibition, bursary, or any other similar educational endowment.

(3) If any question arises whether any income is income arising from a studentship held as aforesaid, the Commissioners of Inland Revenue may, on the request of the Income Tax Commissioners concerned, consult the Board of Education.

(4) In the application of this Sub-section to Scotland and Northern Ireland the Scottish Education Department and the governor, respectively, shall be substituted for the Board of Education.—[Sir J. Withers.]

Brought up, and read the First time.

Sir JOHN WITHERS

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

The object of this Amendment is to ensure that certain stipends paid to research students at universities shall be treated, for the purposes of taxation, as earned income and not as unearned income. [Interruption.] The question has arisen owing to the decision of the Inland Revenue authorities, and calls for [Interruption].

Lieut.-Colonel SANDEMAN ALLEN

On a point of Order. May I ask whether it is in order that there should be so much conversation in the House that one cannot hear what is being moved?

Mr. SPEAKER

That is never in order.

Sir J. WITHERS

I was saying that this new Clause proposes that the stipends paid to research students at universities should be treated as earned income and not as unearned income, as has been decided recently by the Inland Revenue authorities. The decision has caused a considerable amount of uneasiness. I will explain the position as it is. While students are undergoing their university course they have as a rule to take up a scholarship. If it is agreed that they are eligible for research work, there are, at Cambridge, for instance, 25 different funds in the hands of trustees which are set aside for the purpose of research work; that is to say, a student is paid a certain amount of income to enable him to carry out a definite scheme of research work in a definite direction. First, the student has to satisfy the experts that he has the ability for research work [Interruption] and he has to apply himself to it and to satisfy the rectors every year, or at shorter intervals, that he is doing his work properly. He is liable to be dismissed at any time if he does not carry out those commissions.

I should have thought, and I think ordinary people would consider that if any income was received, that was earned income, but for some reason, and by some mistake, it has been treated as unearned income. I have had a very kind note from the Chancellor of the Exchequer saying that he appreciates what is being done, that he has looked into the matter, and I gather from his letter that he admits the principle that I have ennunciated, which is, that under the existing law the income ought to be treated as earned income. I understand that the Chancellor will in future give orders by administrative action that this principle is to be carried into effect. If he does that, and we are satisfied that the stipends will be treated as earned income in the future, I do not wish to press this Clause, but I should like that to be made clear because there has been a good deal of anxiety about it. I should like a clear pronouncement upon the subject.

Major ELLIOT

I am glad to be able to give my hon. Friend the assurance which he desires. If an individual is getting a stipend on the terms that he is devoting a definite time to research on a special subject, he should be assessed under Schedule E, on the ground that there is employment and that the stipend is earned income. I hope, with that assurance., that my hon. Friend will not find it necessary to press the Clause.

Sir J. WITHERS

Upon that definite assurance I would like to ask leave to withdraw the Clause.

Motion and Clause, by leave, withdrawn.