§ MR. G. C. T. BARTLEY (Islington, N.)I beg to ask the Chancellor of the Exchequer whether his attention has been called to the case, W 1 a 546, before the Inland Revenue, in which that Department claimed Income Tax on a mortgage although no income had been received from the mortgage or rent from the property for four years, and stated in their letter of the 31st December 1896, though they subsequently waived their claim in this particular ease, that "the Special Commissioners must regard the full amount of the mortgage interest annually accruing (whether it is actually realised by year or not) as representing the income from this source for the purpose of the Income Tax Acts. Whether this claim for Income Tax on incomes nominally accruing, but not paid has his sanction; and, whether it is enforced on unpaid dividends or interest on debentures and other classes of property; and, if so, under what clauses of the Income Tax Acts it is based?
§ THE CHANCELLOR OF THE EXCHEQUERMy hon. Friend seems to be under a misapprehension as to the point involved in this case. The Inland Revenue do not claim Income Tax from a mortgagee in respect of interest which he does not receive. A mortgagee pays 1551 his Income Tax indirectly, that is, by the deduction of the amount of it from the mortgage interest, when paid over by the mortgagor. Where, therefore, no interest is paid, there is no deduction. But, in considering a claim for exemption or abatement, the Inland Revenue insist that mortgage interest due to a person making the claim should he taken into account in computing his total income, even if it has not been paid within the year, unless it can be clearly shown that such interest is irrecoverable, is, in fact, a bad debt. This was the case in the present instance. As soon as the Inland Revenue were satisfied that the interest was irrecoverable they abandoned the claim that it should be taken into account. The same principle applies generally in the case of claims to exemption or abatement, to dividends, and any interest accruing within the year. Such interest is included in the statement of the claimant's income, unless it can be shown that it is not only in arrear but irrecoverable.
§ MR. BARTLEYasked whether the right hon. Gentleman was aware that in this particular case the Inland Revenue knew that no rents had been received for four years, and was that not sufficient evidence to show that practically the matter was a bad debt?
§ THE CHANCELLOR OF THE EXCHEQUERpresumed they had heard that.
§ MR. BARTLEYsaid the claim was made after they know that.