HC Deb 24 November 1914 vol 68 cc988-1004

(1.) In order, as far as may be, to provide for the collection of Income Tax (including Super-tax) for the last four months of the current Income Tax year at double the rates at which it is charged under the Finance Act, 1914, the following provisions shall have effect:—

  1. (a) The amount payable in respect of any assessment already made of Income Tax chargeable otherwise than by way of deduction, or of Super-tax, shall be treated as increased by one-third, and any authority to collect the tax, and remedy for non-payment of the tax, shall apply accordingly; and
  2. (b) An assessment of any such Income Tax or Super-tax not already made shall be made for an amount one-third more than that for which it would have been made if this Act had not passed; and
  3. (c) Such deductions shall be made in accordance with regulations prescribed by the Commissioners of Inland Revenue in the case of dividends, interest, or other annual sums (including rent) due or payable after the fifth day of December nineteen hundred and fourteen as will make the total amount deducted in respect of Income Tax for the year equal to that which would have been deducted if Income Tax for the year had been at the rate of one shilling and eightpence; and
  4. (d) Sub-section (1) of Section 14 of the Revenue Act, 1911, shall apply, in cases where both the half-yearly payments referred to therein have been paid before the passing of this Act, as if this Act were the Act imposing Income Tax for the year, and as if one shilling and eightpence were the rate ultimately charged for the year; and
  5. (e) Where the amount of any exemption, relief, or abatement under the Income Tax Acts is to be determined by reference to the amount of Income Tax on any sum, the amount of the tax shall be calculated at one shilling and eightpence, with a proportionate reduction where the relief is granted under Section 6 of the Finance Act, 1914; and where Income Tax is payable in respect of a part only of a year, the tax shall be deemed to be at the rate of one shilling and eightpence.

(2) For the purpose of the Provisional Collection of Taxes Act, 1913, or of continuing Income Tax for any future Income Tax year, the rate of Income Tax for the current year shall be deemed to be two shillings and sixpence.

Sir F. LOW (Norwich)

I beg to move, at the end of Sub-section (e), to insert the words "Persons paying Income Tax direct shall be allowed to pay same by two equal instalments, the first of which shall be due on the 1st day of January and the second on the 31st day of March."

When the Bill was down for Second Reading the question of the payment of Income Tax by instalments was raised by the hon. Member for Wigan (Mr. Neville) and by the hon. Member for Warwick and Leamington (Mr. Pollock). The Financial Secretary to the Treasury and the Attorney-General dealt with questions raised during the course of the evening, but so far as I can remember they made no allusion whatever to this question. I have put this Amendment down for the purpose of eliciting some expression of opinion, at all events, from the right hon. Gentleman in charge of the Bill with regard to payment of Income Tax by instalments. As the matter exists at present Income Tax on property and on securities is payable as it accrues due, quarterly or half-yearly or even monthly, as the case may be. But with regard to Income Tax which is payable out of earnings it is all collected in one lump sum at the beginning of January. It has been represented by several hon. Members that that practice, especially on the professional classes, constitutes a very grave hardship. At a very expensive period of the year when money is outgoing in various directions there is a large sum to be paid for Income Tax. As the law is being altered by this Bill in the future a far larger sum than has ever been payable in the past will become due in January.

I suggest to those who have charge of the Bill that this is a matter which requires and deserves attention. To take out of the pockets of professional people this very large sum—large relatively to their income—in one lump is an enormous hardship upon those who have to pay it, and I have proposed this Amendment as a very slight alleviation. The practical result will be to make the tax payable in two instalments with an interval of three months. I have made the second instalment payable on the 31st March in order to bring it within the financial year. That would give a very appreciable relief to the taxpayer, without, as far as I can see, causing any difficulty or embarrassment to the Treasury. The Treasury will merely have to wait a period of three months for the second instalment. I should have liked to propose a much more drastic Amendment, namely, that the Income Tax should be spread over the year; but on consideration it seemed to me that that would be too large a matter to take up in the present state of affairs. Therefore I have put forward this little measure of alleviation, and I very urgently press upon the Treasury authorities the absolute necessity of giving some such relief. We have almost at the end of the year a large increase of Income Tax, and it is obvious that many people who had not expected this increase will, if such a large demand is made at the beginning of January, be very seriously embarrassed. It must be borne in mind that at the present time the raising of money upon securities or anything of that sort is a very difficult matter, and very grave pecuniary embarrassment may be brought upon many well deserving people if the tax has to be paid in one lump sum.


My hon. and learned Friend has raised a matter of very great importance with which I wish to deal in the manner that such an important matter deserves; but I am a little embarrassed because he was not able to put his Amendment on the Paper, and consequently I have to do my best to gather its terms from my hon. Friend's description of his intention. I do not pause to criticise his proposal in point of form. It would certainly need to be looked at before such a proposal could be adopted in order to define more precisely the cases to which it was intended to apply. But I do not trouble about that at all. My hon. Friend's intention was explained by his speech, and I want to deal with the matter in a broad way. My hon. Friend did not refer to the fact that the collecting of Income Tax by instalments has been tried before. There is nothing new about it. Anybody who turns to Section 176, I think it is, of the Income Tax Act, 1842, will find that that enactment provided for the collection of Income Tax in four quarterly instalments, payable on the 20th June, the 20th September, the 20th December, and the 20th March. The Committee will observe that there was an attempt to divide the year into equal portions. My hon. Friend cannot make an equal division, because more than half of the fiscal year has already gone by. I will point out presently a great practical difficulty that would arise from his proposal. What was the experience of the revenue in relation to the provision of 1842? Income Tax was collected under that provision, or at any rate that was the law relating to its collection from 1842 to 1868. I alter my phrase and say that that was the law because, as a matter of fact, it was found even at that time that the attempt to collect by instalments went too far, and I believe that in practice people usually paid in two, and not four, instalments. That was altered by Parliament in 1868, and since that date, I believe, Income Tax has been due to be paid for the year at one specified time—at a date, be it noted, which is decidedly at the later end of the fiscal year.

The experience which immediately emerged as the result of the change was that collection was much more effective and rapid, and much less expensive. So that apart from the special necessities of the time, I do not think it can be doubted that it was a wise change for Parliament to make, and that, at any rate in ordinary times, it is well that Income Tax should be collected at one date, and not be spread by instalments over the year. My hon. Friend says "Yes, but we have here a special difficulty which calls for special treatment." I want to deal with that point quite sympathetically. It is quite true that the occasion is special in two ways, perhaps in more. It is special, because there is a substantial increase in the duty, and because there may be in some cases special difficulty in paying the tax. It is special in a third way, I think, because it is specially important that we should collect a substantial amount of money without frittering that money away unnecessarily in the process of collection. But it would not at all have the easy consequences which my hon. Friend supposes if we adopted his proposal. If you say that half the Income Tax becomes due on the 31st March, you will not collect more than the smallest fraction of the second instalment on that day. You will not get in this financial year at all the Income Tax which Parliament sets out to get. I do not know whether everybody's experience is the same as mine, but I confess quite freely—and I do not believe that I have been specially favoured by the authorities—that I do not find my self compelled, as one of the first good resolutions of the New Year, to draw my cheque for Income Tax. There are a good many people who do not, as a matter of fact, pay on the nail. Of course there has to be a certain reasonable amount of give-and-take in the matter.

I submit, therefore, that it is a mistake, as a matter of effective administration, to divide the tax in two. Moreover, the date suggested would have the result of postponing the payment of a very large sum of money, running into millions, until it was not part of the revenue of this year at all. Taxation is counted as the revenue of a particular year, not because of the date of the Act of Parliament under which it is charged, but according to the time when it is collected. My hon. Friend is quite right when he says that we must consider hard cases, such as that of a man who had every reason to expect that he would this year enjoy the ordinary income that he has enjoyed for years past, but who, owing to the special circumstances connected with the War, finds that his income this year has dropped substantially. It is obviously right that we should deal with these cases, and we have made a proposal which I hope the Committee will consider one well worth making and well worth adopting to deal with them. That proposal is contained in Clause 12. That will still leave cases where the income of the taxpayer for this year is, in fact, less than the income in respect of which he is assessed. Still, the modification is substantial, necessarily involving, as it does, a considerable loss to the revenue, and therefore a considerable concession to the taxpayer, and I am afraid that under the circumstances it is as far as we can go. As my hon. Friend will see, I have assumed that he was making his suggestion not as an improvement in Income Tax machinery in general, though that might have appeared to be the case from his speech, but as something called for in view of the special difficulties in which we now stand. I have not occupied a moment's time in criticising the form of the proposal. While desiring to be as generous and reasonable as we can, I suggest that the right way to meet the difficulty is by Clause 12, and not by making, side by side with Clause 12, a concession of quite another kind, reversing the method by which Income Tax has been collected for so long and undoubtedly postponing a large part of the revenue which in the circumstances we must raise.


The right hon. and learned Gentleman has not quite, I think, understood the object of the Amendment of the hon. and learned Gentleman opposite. That object, so far as I understand it, is this: Supposing a person whose income is £4,000 a year—the ordinary case quoted—has spent in a year £4,000, less the amount which he has reserved for the payment of the Income Tax in the ordinary way, and that Income Tax is increased by a considerable amount. I gather that the hon. and learned Gentleman thinks that it will be rather difficult for that person to find the extra money, because at this time it is not easy to borrow money on any kind of securities, or to find the money which he did not expect so suddenly to have to pay. It may be difficult for him to find the money.

Sir F. LOW

That is precisely the point.


I think the right hon. and learned Gentleman adduced arguments against the proposal which related to something else. I believe that is sometimes done by hon. Gentlemen learned in the law.


I am sorry that the right hon. Gentleman the Attorney-General has not been able to meet the hon. and learned Gentleman behind him. What are the arguments of the Attorney-General? It really comes to this: He made an interesting speech telling us the history of Clause 176 of the Income Tax Act of 1842, which was the Section under which payments for particular periods were allowed. That Section was abolished in 1874. Up to that time—I may be corrected, but I think I am quite right—nobody had ever heard of an Income Tax anything like what is intended at the present time. My impression is that in 1874 even the sixpenny Income Tax was very much resented. About that time Mr. Gladstone declared that he would abolish even the sixpenny Income Tax. In 1874 the method of instalment may have been a very bad one. I think it is quite possible, with the growth of the country, that men should be able to pay a sixpenny Income Tax by one instalment. So that the history of the matter does not help us very much. No history can show us a parallel to the present time, and no difficulties occurred up to 1870 which were anything like the parallel of what we are likely to suffer in January, 1915. The right hon. and learned Gentleman does not criticise the form of the Amendment. If so, we need not bother for the moment as to whether or not we take 31st March or 1st March, because if there is no criticism of the form, we feel quite confident that the hon. and learned Gentleman the Member for Norwich will immediately agree to insert 1st March as the best he can get, instead of 31st March. If there is any difficulty in meeting the revenue or the Income Tax next year, we could modify these details quite well on Report. We could modify the whole Clause, and so could meet the difficulty of the Attorney-General. If you make a second instalment on 1st March you would probably have got rid of the difficulty. Modifications could be made in the actual proposals which ought to meet the real principle which underlies this very valuable Amendment.

I am going to put one more point. It is one which I put last night, but as the Attorney-General was not present in the House, he is not likely to have heard it. It bears very closely upon the suggestion that the Attorney-General makes that Clause 12 will really meet all that is required up to the present time. I asked last night: Will it? If I understand the principle of the Income Tax at all, you pay your Income Tax for the financial year which closes on 5th April. Look at what Clause 12 does. It does this: it brings forward Section 133, as modified by Section 6 of the Act of 1865, and enables the Income Tax payer to make use of it. What are the benefits and exemptions which they get under these two Clauses? They get the right to go to the Commissioners of Income Tax and to show that by reason of a bad year they should be entitled to have a modification of the assessment made upon them. A provision is made in Sections 133 and 134 that the repayment of the taxes they have already paid shall be made to them. Let us see what Clause 12 does. Clause 12—and we are grateful for it—enables a man after payment has been made in January which is an excessive payment, to have the advantage of going before the Income Tax Commissioners in April or May and getting repayment. The cases are likely to be so many that I do not suppose repayment will take place till June. The result, is that you will be taking advantage of Clause 12 to the full, and you will put the Income Tax payer in this position: he will have paid in January what he will have the right to get back in June. The Financial Secretary was probably right when he seemed to have some doubt as to whether it will be possible for the abatement to be made in the early months of the year, or in the early weeks of the year, because the Income Tax Commissioners may say, "Oh, we will take your current year up to 31st December." I doubt whether they have any such power, or legal right.

If they do that they may be flying in the face of Statutes. If they adhere to their present system, as laid down by Statute, I think it is quite clear that what will happen is immediate payment in January, and possible repayment in June. Then comes the suggestion—because, after all, the hon. and learned Member for Norwich makes it no more than as a suggestion of a principle—he suggests that there should be some sort of delay in the final complete payment in the early weeks of the year. If there was a delay in the payment if not of a half, even of a tenth or an eighth, to the later period, it would give the Commissioners some time, perhaps, in which to meet the case, and give the benefit of Clause 12. The position might then not be this: that the tax-payer will have paid and the Commissioners will repay; the position might more fairly then be this: the payment of a portion, the Commissioners holding their hand as to a smaller balance up to one-seventh or one-eighth, then seeing whether or not that account is adjusted, or whether there is anything more to pay. It seems to me that the hon. and learned Gentleman for Norwich has embodied in this Amendment a principle which is a very valuable principle, and one which might well be adapted in order really to make of use the principles which are laid down in Clause 12. Without something of this sort, we shall fail to obtain the full benefits offered in Clause 12. Therefore, while the Attorney-General says that Clause 12 ought to be a benefit, I beg to point out where it is not, and I also think that no reason whatever has been shown why in this very difficult year of heavy burdens we should not have some sort of remission in which perhaps the Income Tax payer and the Commissioners might meet on terms of greater equality, so that the Commissioners might not have the opportunity of taking what ultimately may prove not to be theirs, and be compelled to repay what they never ought to have taken.


It seems to me that the hon. and learned Gentleman the Member for Norwich, and the last speaker, are straining the point too far. The last speaker admits that if the Amendment were accepted it would have to be 1st March. Can anyone then really argue in favour of the extra expense of collecting the tax twice for the difference between a date when any Income Tax payer who can prove that it is a hardship to pay promptly will at all events get a month's grace from the Inland Revenue people? This would bring him to 31st January. Can it be seriously argued that we ought to ask the Government to go to expense in collecting a tax in two instalments for the sake of the dates between 31st January and 1st March? I do not really think that ought to be seriously pressed upon the House. I dare say it would be convenient if our system of taxation was so arranged that the Income Tax, now it is such a heavy burden, could be collected half-yearly. That is not the system, and that is not the Amendment. I think, under all the circumstances, it would be very unwise for hon. Members to press the Government to accept the Amendment.


May I point out what has not been mentioned, that this particular Amendment is simply a matter of relief for the man who is earning income—that is to say, the professional man, or one in similar case, because people who own property pay their Income Tax quarterly. Their Income Tax is deducted from the quarterly rents. People who have Government Stock pay their Income Tax quarterly, because it is deducted from the quarterly payments of incomes paid by the Bank of England. People with shares in railway and other companies as a rule pay the Income Tax half-yearly, seeing it is deducted from the half-yearly dividend payments. In the case, however, of the professional man who is making, say, £4,000 or £5,000 a year, he is called upon on 1st January to pay the whole of his Income Tax out of his own pocket, so to speak. Instead of it being deducted from him, he is called upon to find the money and pay it over in one lump sum on 1st January. There is therefore a particular hardship upon that class of person. I think that the principle suggested in the Amendment would do something—it would not do much—to put that class of person on something like an equitable footing with the rest of the people who con-contribute to Income Tax. For that reason I should be very glad personally to see something done in the direction of enabling that section of the community to pay their Income Tax in reasonable instalments. If I might make a suggestion to the hon. and learned Member who moved the Amendment, it would be that he should, on his part, make some concession to the Inland Revenue authorities that those people who desire to have the power to pay their Income Tax in two instalments should pay the earlier instalment at an earlier date than 1st January, and, if they do so, that they should have a corresponding right to postpone the second instalment for an equal period after 1st January—say, a month or two months on each side of that date.


Unfortunately there are already less than two months from 1st January.


The right hon. Gentleman understands that it is not a particular date that is of importance to the taxpayer. It is being called upon at one moment to pay the whole of a particular tax in one lump sum out of his own pocket. No other contributor of Income Tax does that. As I have pointed out, all these other classes find it spread over a period, and pay in a manner which they do not feel in the same way that the class feels on whose behalf this Amendment has been moved.


I sincerely trust that the Attorney-General will not accept this Amendment, particularly in the form in which it has been suggested by the hon. Member opposite (Mr. Pollock). He said that in this matter we have nothing to learn from history. I am quite sure that those who have read what took place in 1868—I quote from memory—will have discovered that every argument which is being used to get one payment in January and another later was pressed to the full against the instalment plan. When the change was brought about by Mr. Gladstone the amount which came to the revenue as the result of the one collection made an extraordinary difference in comparison with the four collections that previously were made. I am quite sure that if we accept this Amendment in any shape or form we shall be going back upon the benefit of the experience we have gained since 1868. The change Mr. Gladstone brought about was most beneficial.


Would the hon. Gentleman say what the Income Tax was then?


That does not affect the argument at all. I am talking of what would be the effect on the Treasury if it divided the collection into two instead of one, and I say all experience shows that the change brought about by Mr. Gladstone was most beneficial. The hon. Member for the West Derby Division of Liverpool referred to the case of big companies and railways, but the expenses there would be entirely different from what they would be calculated separately, and therefore if the Treasury had to look to every individual who does not happen to be a shareholder, they will find themselves in the position of having to employ a considerably larger staff. The hon. Baronet the Member for the City referred to an individual having £4,000 a year and who, when called upon to pay this tax, may find that he has spent more than his income. I think a man living so near the total amount of his income as that the payment of the tax would leave him on the wrong side is a very imprudent individual.

6.0 P.M.


There are very many imprudent individuals in the country.


There may be many imprudent individuals in the country, but you do not legislate on behalf of imprudent individuals. I am quite sure if you make this departure you will simply have the experience you had before the change was brought about by Mr. Gladstone.


I do not deny that there are a great many difficulties, such as the hon. Member pointed out and such as the Attorney-General indicated, in levying Income Tax by instalments. In respect to the amount of this Income Tax I might point out to my hon. and learned Friend the Member for Leamington that there was once an Income Tax of 2s. I do not know how it was levied. I think the Attorney-General would add to the debt the Committee owes him if he explained how he conceives the provisions of this Act will work in respect of people whose incomes are derived from unsettled profits, and especially people whose income year goes up to the 31st of March. I heard of the case of a trader who says "I really do not know, if I am asked on the 1st of January, what my income will be, because I do not make up my books until the 31st March, and as I understand this current year is to be taken into account in the three years' average I cannot tell you what my income is until I have made up my books." That is all I want to make clear. I think it is a difficulty, and a great many people do not understand how the levy is to be made.


May I put a point to the same connection. The Attorney-General announced the other night that in levying Super-tax a new concession would be made. The illustration he gave was this. He took the case of a man with £6,000 a year, and he said if a man proved that his income for Super-tax in the year of charge was one-third less than the amount upon which he should he charged according to the period of average, he would be allowed to pay upon the diminished sum.


That comes on on an Amendment to the next Clause, standing in the name of the hon. Baronet the Member for the City.


I shall endeavour to deal with the point put by the Noble Lord, and, if I may say so, I understand the point put by the hon. and learned Gentleman who has just sat down. He referred to the Super-tax case by way of illustration. I answer the Noble Lord in this way: As I conceive it, the way it will work out is something like this—and what I am going to suggest would also have a bearing on the criticism of the hon. and learned Gentleman the Member for Leamington, because I do not agree that you will have what he suggests—that is to say, an unduly large sum paid on the 1st of January, followed some months later by a large rebate. I think what will happen will be this: Of course some incomes will not be affected by this difficulty at all, as the hon. Member for the West Derby Division of Liverpool pointed out. One of the difficulties of the Amendment of my hon. and learned Friend is that probably it would apply to everybody. His proposal is that if a man this year is making an income three times as big he shall nevertheless only pay half his tax on the 1st January. Take a case such as the Noble Lord mentioned, where this year a trader or a commercial man or a professional man is earning an income which fluctuates, and says to himself, "Here I am offered a concession so that I may bring my income of this year into the average for last year and the year before, in place of being assessed upon the average obtained by historical data. But what is the good of telling me that, because I do not know what my income this year will be until this year comes to an end?" If he makes up his books at the close of the 31st March his case is the most difficult of all. I imagine what will happen is that if you find a taxpayer of that sort who is having a thoroughly bad time, and he says to the Inland Revenue before the New Year "it is already plain to me that my income this year is going to be a good deal below the figure I am assessed at," I am sure his appeal will be successful.

I imagine what the Inland Revenue would say is this—and the same would apply to Super-tax, but I do not want to go into that now—they would say, "What is your estimate by 1st January, when three-quarters of the year is over?" He will offer some figure. If they think that is fair, the Inland Revenue will say, "Let us take that estimate, and we will average it with last year and the year before, and pay on the average of the three years. If it turns out by the 31st March that you have underestimated your last three months as compared with what you have actually received, there will be something more to pay. But if it turns out that your last three months were worse than you thought, then possibly you have paid too much." That, I think, the Noble Lord will see tempers the harshness, and the apparent difficulties of our proposals, and I am quite confident that is in practice the way the thing has got to be done. Everybody knows that the way in which the Inland Revenue proceeds is to ask for an estimate, and there is an adjustment if it is a little wrong. That is what I am informed is the intention of the Inland Revenue. We quite appreciate that there are many professional and commercial people who find themselves in such a position, and it would be most unreasonable not to meet a genuine case in a fair way. I hope that is the way it will be met. If this Amendment were adopted it would affect all people, even those whose incomes are bigger than usual, and it is not the way in any case to deal with special cases. It does not apply to extra Income Tax, and so far from a man who has to pay Income Tax on profits and accounts, being hard hit in comparison with a man who receives rents, I think the hon. Member for West Derby will see Income Tax on profits is favoured as compared with other Income Tax, three-fourths being always paid in arrear, but as to one-quarter it is paid in advance. If the suggestion I make, after communication with the authorities, is a fair suggestion, I hope my hon. and learned Friend may see his way, having raised this very important point, to withdraw this Amendment.


While one is very grateful to the Attorney-General for what he has said, the problem, I am afraid, still remains. Perhaps the Attorney-General will say where the Commissioners get the right to say that the year ends on 31st December, rather than the ordinary financial year. I may be wrong, but I always understood, for the purpose of Income Tax, you had to make the financial year the same as the Treasury. [HON. MEMBERS: "No, no!"] Is it done by custom, or by regulation or by Statute?


By Statute.


Then you can make your year end at any period you please.


Section 100 of the Income Tax of 1842 provides that in respect of Schedule D the assessment is to be the just average of three years, ending on such a date in the year immediately preceding the year of assessment on which accounts have usually been made up or the 5th April.


That explains what was in my mind. So it will not be a concession to the trader. They will have to work on the same system as heretofore. Otherwise there is considerable difficulty as between the trader and the Treasury. If the Treasury do not hold him to the same year, he may choose a year in which his receipts are very much worse. On the other hand, if he keeps to the usual period of the year, they will keep him to the normal average and not allow him a period of the year in which he should choose to make up his books. I think the Attorney-General in his answer has been too liberal, from the Treasury point of view, when he indicated that the Commissioners were to allow us to make up our books to a period of the year never before allowed.


I said nothing of the kind.


I understand from the Attorney-General that the question I have raised will be considered by the proper authorities, and therefore I ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."


In answering the point raised by the Noble Lord the Member for Oxford University (Lord Hugh Cecil) we were told that the case would be met of the difficulties with traders' books where they are made up in March by allowing that trader to assess the amount which he thought he would be likely to have as his income at the end of the year. Will the right hon. Gentleman give the Committee an assurance that instructions to that effect will be sent out by the Commissioners? The right hon. Gentleman was rather careful to say that he imagined it would be so. It would make it very much simpler if instructions were issued from the Treasury that this is to be the way in which the difficulty is to be met.


Personally, I do not think there is any doubt about this point, but some doubt has been expressed to me as to the way in which Income Tax is going to be taken on foreign bonds. I suppose it will be deducted at 1s. 8d.? It is deducted differently on English companies and Consols and foreign bonds.


Where a company makes up its books to the 31st December this year and an interim dividend has been declared at the end of June with respect to trading profits and no dividend is payable to the half-year and where the Income Tax has been deducted from the debentures, I want to know whether the Treasury will make a claim?


The effect of Section 11 as regards dividends on shares in English companies is, I think, that so far as the dividends are on shares in English companies, the object of this tax is to secure that the total dividend paid for the year shall contribute in Income Tax so much by adding the different contributions together as will make it come to 1s. 8d. for the whole. Where there are two dividends paid half-yearly, one of which has already been paid and one which is going to be paid, then the dividend which has already been paid in the summer has suffered a reduction of 1s. 3d. Assuming the same interest was paid in December, then you would want to subtract such an amount in December as would have this result, that if you added the two half-years together the total sum contributed would be 1s. 8d. to the whole year. Suppose a man in the first half of the year receives £100 and receives another £100 at Christmas, the £100 he has already received has suffered tax at the rate of 1s. 3d., which is the tax at the old rate. If the whole is treated as one total, the rate will be at 1s. 8d. The hon. Member opposite says it may happen that you do not get any dividend for the second part of the year and what has happened is that the man has got for the year a dividend which has only suffered the lower rate of tax, and he points out what will have happened is that if we had known in time we should have deducted a little more. That is provided for, because there is a provision the effect of which is that as soon as the shareholder has received his dividend, less the lower duty, the shareholder in making his own return of profits and gains will have to account for the difference. Now I come to the point raised by the hon. Baronet the Member for the City of London (Sir F. Banbury). The hon. Baronet puts to me a question about foreign bonds. As the hon. Baronet knows, generally speaking, interest which comes from abroad is dealt with on the principle that it is taxed as received, and I think I am right in that statement. Before the end of the Debate I will make certain on this point, but I believe that when you deal with interest on foreign bonds it is payable half-yearly and you deal with them as you do with shares in an English company. [HON. MEMBERS: "No!"] At any rate we shall come to the matter on Report, and then I will make the point quite clear.


With regard to the point raised by the hon. Member for Eastbourne, it is our intention to give instructions to the surveyors.


Will the right hon. Gentleman answer my point, where there are five months at 1s. 3d. and one month at 1s. 2d.?


I will make a statement on Report which will meet what the hon. Baronet has been good enough to tell me.

Question put, and agreed to.