§ (1) Section forty-seven of the Finance (No. 2) Act, 1915 (which confers power on the Treasury to issue securities free of taxation in certain cases), shall, so far as Income Tax (including Super-tax) is concerned, have effect as though the reference to persons not domiciled in the United Kingdom were omitted therefrom.
§ (2) Where securities issued under Section forty-seven of the Finance (No. 2) Act, 1915 (which gives power to the Treasury to issue securities free of taxation), for the time being form part of the investments of the foreign life assurance fund of an assurance company, the income arising from those securities if applied for the purposes of that fund or reinvested so as to form part of that fund, shall not be liable to Income Tax.—[Mr. McKenna.]
§ Clause brought up, and read the first time.687
§ Mr. MONTAGU
I beg to move "That the Clause be read a second time."
This new Clause makes a slight alteration in the power of the Treasury to issue securities during the time of war, free of Income Tax. The Section as passed in the Act of 1915 gave us power to issue these securities to people who are neither domiciled in nor ordinarily resident in the United Kingdom a difficulty has arisen because of the word "domiciled." The legal meaning of the term "domiciled" is that a person is domiciled in the United Kingdom if he has the intention of returning. The consequence is that it has been found that Indian Civil servants, and persons carrying on business in foreign countries, have got to pay Income Tax upon securities which other people resident abroad do not have to pay, because they are still domiciled in the United Kingdom. An hon. Member drew the attention of the Chancellor of the Exchequer to this, and on behalf of many Anglo-Indians and Anglo-Chinese it was decided to ask the Committee to assent to a slight alteration of that power, which leaves out the question of domicile and makes it apply equally to all citizens not ordinarily resident in the United Kingdom, whether they are domiciled there or not. I do not think that is controversial. The second part of the Clause deals with the funds of assurance companies who have got to keep a certain number of their life insurance funds invested in foreign countries. By Section 5 of the Finance Act, 1914, income derived from these securities was exempted from Income Tax when the recipient was resident abroad, but immediately the money came home he became liable. During the War, in response to invitations from the Government, many insurance companies have brought home the income from their securities abroad for the purpose of increasing our funds during the War. This patriotic act has led insurance companies into liability for Income Tax, and the Clause is intended to meet the difficulty.
Sir H. DALZIEL
Is it not intended to deal principally with America? Does it not apply to America more than to India?
Sir H. DALZIEL
Do I understand that this only applies to Government securities that may be invested in America?
§ Mr. McKENNA
My right hon. Friend knows that certain Government securities are now issued free of Income Tax to-foreign holders. It is felt that the same release from liability to pay Income Tax ought to be enjoyed by British subjects resident abroad as would be enjoyed by them but for the fact that the original Acts referred to "domicile." This refers mainly to British subjects resident in India who are really domiciled here and intend to return here. On the securities which they hold Income Tax is chargeable, though they are living abroad and spending all their income abroad and are not in other respects subject to Income Tax.
§ Clause read a second time, and added to the Bill.