§ If any individual who has been assessed or charged to Income Tax for the current Income Tax year claims and proves in manner provided by the Income Tax Acts that his actual income from all sources for the year of assessment is less by more than ten per cent, than the income on which he has been so assessed and charged, he shall be entitled to repayment of such part of any Income Tax paid by him, either by way of deduction or otherwise, as is equal to the difference between the amount of the tax so paid and the amount which would have been so paid if he had been assessed or charged on his actual income for the year of assessment.
§ Mr. PENNEFATHERI beg to move to leave out the word "individual," and to insert instead thereof the word "person."
I move this Amendment in order to obtain an answer to a question which the Financial Secretary to the Treasury has already answered to a certain extent. I want to find out whether in, this Clause the word "individual" has been carefully chosen excluding persons and firms. My 266 object in asking this is that the assessment which is referred to is in very many cases made upon the firm and not upon the individuals, and that the total amount so levied is then split up by the Income Tax authorities according to the particulars furnished to them, and the rate is calculated upon the income of each individual partner. But in many cases I would sugget that it might be more convenient both for the taxpayer and the Income Tax official if the assessment were made upon the firm and that the relief of the claim might be granted to the firm. I do not wish to press this point because I realise as a great many others realised that this Clause goes a very long way indeed in the direction of a concession to the Income Tax payer, and is a very fitting adjunct to the Excess Profits Tax, because here relief is granted to those who have suffered by the War and in the other case excess taxation is required from those who have benefited by the War. Therefore, realising that this Clause is really a very just concession I do not wish to press the point, but I would like to get from the Chancellor of the Exchequer a statement as to whether "individual" means "person" and whether "person" means "firms."
§ Mr. MONTAGUThe word "individual" means individual, and the relief in regard to firms is to be found in Clause 18.
§ Mr. PENNEFATHERI beg leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ Question proposed, "That the Clause stand part of the Bill."
§ Mr. AINSWORTHI wish to ask the right hon. Gentleman how far this Clause will apply to a species of property in Scotland which has been extremely hard hit lately, and from which either no income i3 received or a greatly reduced income? I refer to shooting rights. I should be glad to have the opinion of the Chancellor of the Exchequer or the Secretary to the Treasury. The proprietors of shooting rights point out that where rents for shooting rights amounting to hundreds, and in some cases thousands, had been received, they are now unable to let these properties for any purpose whatever, and this applies to a large portion of the country where they have received no rents. I should like to know if under the interpretation given of this Clause the proprietors will have 267 thorough redress individually, and that no Income Tax will be expected where no income has been received. This is a large question, and certainly embraces a large class of property not only in Scotland, where there are large estates, but no doubt in other parts of the country. I have had the opportunity of calling the attention of the Financial Secretary to the subject, and I should be glad to hear his view on the point as to whether Income Tax can be reasonably claimed where either no income or a greatly reduced income has been received, and whether no Income Tax should be charged except on incomes of the proper value?
§ Sir F. BANBURYI did not understand the answer of the Financial Secretary to the Treasury given to my hon. Friend below the Gangway (Mr. Pennefather), who asked whether "individual" included firms, and the right hon. Gentleman said No; that "individual" meant individual, and that firms received relief under Section 18. I look at Clause 18 and I find it enacts Section 13 of the Finance Act of 1914, which gives relief in respect of diminution of income during the War, etc. Clause 19 does not deal with the War at all. It provides that if the individual finds that his income is less than that on which he was assessed, then he may claim relief. I cannot see myself why a firm should not receive the same relief, if it is just, as an individual. A firm is composed of individuals, and why should a person who happens to be a member of a firm be refused relief which he would receive if in business on his own account and without a partner? I dare say I have misunderstood the answer and I should like a further answer.
§ Mr. McKENNAThe answer which my right hon. Friend gave was quite correctly understood by the right hon. Gentleman (Sir F. Banbury). A person includes a firm, but an individual does not include a firm. Individuals are dealt with in Clause 19 and firms in Clause 18. I see the force of the point put by the right hon. Gentleman, but I think he will appreciate that the answer, I am bound to say, really covers the case. So far as regards the firm the profits are, in the main, divided in the form of dividends. If the firm makes less income the dividends are reduced, and the shareholder will receive less income. The shareholder is an individual under Clause 19, and where the firm has suffered the benefit of the Clause 268 will accrue to the individual shareholders of the firm provided their income has not been made up to its former level from, other sources. We think it is necessary to continue the old relief in the old form, to firms, but so far as the individual is concerned, with whose case of hardship we wish specially to deal, because we are dealing now with that case of individual and personal hardship, dealing with that and with that only, we think the remedy of Clause 19, which is larger than the remedy of Clause 18, is properly applied.
§ Sir F. BANBURYI do not quite understand the explanation. It seems to me that the right hon. Gentleman has dealt with companies and not with firms. He says that in the case of firms there is a dividend, and that the shareholder will receive the exemption if his dividend is cut down. That is all right in the case of a company, but not in the ease of a firm. Let me give an instance. Suppose the right hon. Gentleman and myself are in partnership and make a profit of a £1,000, and that that profit is divided equally into £500 each, the right hon. Gentleman and myself have no means, in that case, of obtaining any relief at all, because the assessment is made, not on us individually, but upon the firm. May I ask the right hon. Gentleman to answer that question?
§ Mr. McKENNAI thought I had already answered it.
§ Sir F. BANBURYNo!
§ Mr. McKENNASuppose the £500 of which the right hon. Gentleman speaks is my sole income, and that we make no other return for Income Tax—
§ Sir F. BANBURYThe relief under Clause 18 is not as large.
§ Mr. McKENNAI have stated it is not as large. In our view Clause 18 relief is sufficient for the case of the firm or company or person, person including firm or company. We do not believe that it is sufficient in the case of an individual. It is quite possible that we may find exceptional cases in which there is no sound distinction to be drawn why an individual member of a firm should not get the benefit of Clause 19 instead of only the benefit of Clause 18. But in the great mass of cases, in far more than 99 per cent., the case put-forward by the right hon. Gentleman would not apply, and the individual would get the larger benefit. It is only in the special case where there is no individual 269 assessment that that would not be so. If the right hon. Gentleman were assessed apart from the firm—and that is the normal case and the case of all companies—the relief given under Clause 19 would properly apply. This is one of those eases where in practice it is impossible to draw a hard and fast line which would not give too much relief in some cases or be unfairly hard in others. That is true of the incidence of all taxes. But dealing with the cases as a whole, we think the form of relief which we have now given is the proper one; that is to say, it is given in the ordinary case of hardship to the individual.
§ Sir F. BANBURYI cannot agree that these are exceptional cases. Certainly ton years ago the great majority of people in the City were in partnerships in firms, and if they had other sources of income they were investments where the tax was deducted at the source and no separate return was made. I will continue my illustration of a partnership.
§ Mr. McKENNAMay I intervene? I have had an opportunity of consulting the authorities under the Gallery, and they say that even in that case the individual partners could put in a fresh assessment of their own—they would not normally do it—and then they would get the relief.
§ Mr. J. M. HENDERSONI have dealt with many of these cases. You can always get a separate individual assessment in a partnership.
§ Mr. AINSWORTHWill Clause 18 apply to proprietors who are unable to let their shooting or can let it only at a reduced rental?
§ Mr. McKENNAI think I know the case to which my hon. Friend refers. It is quite a special case, and I will communicate with him privately before the Report stage.