MR. M'LAEENasked Mr. Chancellor of the Exchequer, Whether his attention has been called to the fact that many Building Societies have been in the habit, notwithstanding the provisions of the Income Tax Acts, of claiming and receiving from their mortgagees or borrowing members full interest on advances without any reduction in respect of Income Tax, and also to the hardship thus inflicted upon large numbers of the thrifty working classes; and, whether it is within the power of the Treasury to enforce against such Building Societies the penalty of fifty pounds for each offence, under section forty of the Act of 1853, in case such Building Societies do not refund to their borrowing 631 members the moneys thus wrongfully received?
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)In reply to the first Question of my hon. and learned Friend, I have to say that the refusal by Building Societies to allow any deduction in respect of Income Tax from interest on advances made to their mortgagors or borrowing members has frequently been the subject of complaint to the Board of Inland Revenue. Such refusal, where persisted in or defended in any way, is, upon inquiry, usually found to be based upon the difficulty which is alleged to exist in ascertaining how much of each payment made to the Society represents the interest on the sum advanced. It is apparent, however, that in any properly constituted Society the amount to be repaid must be arrived at by an actuarial calculation of how much will suffice to make good the sum originally advanced, together with interest at a certain rate per annum. When a complaint has been made, the Board of Inland Revenue have explained to the Society that upon making each payment, monthly or otherwise, a member is entitled to deduct Income Tax at the current rate upon so much thereof as represents interest, and the result has been generally satisfactory, the deduction claimed being allowed. There would be difficulty in proceeding under the 40th section of the Act of 1853, where, from ignorance of the law, or inability on the part of the borrower to ascertain the proportion of interest included in the payment, the deduction sought to be made has exceeded that which the complainant is entitled by law to make. In reply to so much of my hon. and learned Friend's last Question as is not met by what I have said, I may add that the penalty of £50 does not attach to a refusal to refund, but is confined to a refusal to allow. I will look further into this matter during the Recess, and I shall be glad of any assistance which my hon. and learned Friend can give me; but the question is one of a highly technical character, and surrounded with practical difficulties.