§ 54. Mr. CAUTLEYasked the Chancellor of the Exchequer the number of farmers and occupiers of land who were assessed to Income Tax under Schedule B and the number who elected to be assessed under Schedule D in the year 1917–18, respectively, and if possible the amount of the average assessment of each class?
§ Mr. BONAR LAWThe figures asked for are not available. The latest information with regard to assessments under Schedule B—including figures relating to assessments upon farmers under Schedule 1286 D—will be found on page 15 of the Sixtieth Report of the Commissioners of Inland Revenue.
§ Mr. WATTIs it not the case that the farmers have to come under Schedule D, and then some months after can come under Schedule B?
§ Mr. BONAR LAWI think not. I think if they elect to come under Schedule B they can do so at once.
§ Captain WRIGHTIs the choice final?
§ Mr. BONAR LAWIt seems to me that if the farmer makes that choice and finds that it would have been better to take the other Schedule he could not go back.
§ Captain WRIGHTIn no subsequent year?
§ Mr. BONAR LAWI cannot say as to that, because obviously each Finance Bill applies only to the year for which it is passed.
60. Colonel Sir F. HALLasked whether, in view of the proposals contained in the Budget for an increase of the Income Tax to 6s. in the £, and the result caused by owners of bearer bonds on dividends payable 1st June and 1st September, 1917, being charged 5s. in the £, whereas the holders of inscribed stock and stock transferable by deed in consequence of the interest not being deducted at the source will be liable for 6s. in the £, the Government will, in order that this inequality may be done away with, give instructions to the Commissioners of Inland Revenue that the holders of inscribed stock and stock transferable by deed are only to be charged the same rate of Income Tax, namely, 5s. in the £, as the holders of bonds to bearer?
§ Mr. BONAR LAWAs I think the House would like to have a full explanation of this question, I shall, with my hon. Friend's permission, circulate the answer.
§ The following is the answer circulated:
§ Prior to the issue of the 5 per Cent. War Loan, it was represented that it would enhance the popularity of the issue if investors were afforded a choice as between stock the interest on which might be paid without deduction of Income Tax at the source and bonds carrying interest subject to deduction of tax at the standard rate in the ordinary course. It was urged that to the investor of moderate means it would be an attractive advantage to be 1287 able to pay the tax on his War Loan interest under a direct assessment at the rate of Income Tax appropriate to his total income and so avoid the otherwise inevitable inconvenience and delay of claiming repayment of a part of the tax.
§ I thought there was considerable force in these representations, and investors in this issue were, therefore, given the option of (1) bonds carrying interest subject to deduction of tax at the time of payment of the interest, and (2) registered or inscribed stock carrying interest payable without deduction of tax, but assessable in the hands of the recipient.
§ Provision was made in the Finance Act, 1917, to give effect to the second alternative, and the interest on the registered and inscribed stock accordingly became assessable on the principle which has been in force since 1842 in connection with the interest on any Government securities not charged to Income Tax by way of deduction.
§ The basis of assessment in these, as in all cases of interest not charged at the source, is the amount of the income arising in the year preceding the year of assessment. Thus the holder of inscribed or registered 5 per cent. War Stock who received £100 interest in the year 1917–18 was not chargeable with any tax upon that interest in that year; nor indeed did he have to include the item in a statement of total income from all sources, so that, if his statutory income from other sources amounted to £700, he was entitled to claim the abatement and children allowances for total incomes not exceeding £700, although in fact he had an additional £100 of income.
§ For the year 1918–19 his liability is on the amount of the preceding years' income, £100, whatever the amount he may actually receive from registered or inscribed stock in the course of the year of assessment; and the rate of tax to be charged is that approved by Parliament for the year 1918–19. This is the case with all Income Tax assessments upon whatever basis (current year, preceding year, or average of years) the income is required by law to be computed.
§ As regards Super-tax the holder of this stock does not begin to pay until 1919–20 for the reason that Super-tax liability is calculated on the statutory income, as computed for Income Tax purposes, for the preceding year.
1288§ The holder of bearer bonds receives his interest under deduction of tax at the rate in force at the time of payment; he bears tax year by year on the actual receipts of the year, and by the 5th April, 1919, he will have paid two years' tax on the two years' income which he has received, whereas the holder of a corresponding amount of registered or inscribed stock during the like period will have paid only one year's tax on the two years' income which he has received.
§ Assuming both investors to hold for ten years, each will be required under the Income Tax Acts to pay ten years' tax, the difference between them being that the holder of bearer bonds begins to pay at once, and bears tax finally with the last payment of interest in the tenth year, while the holder of inscribed or registered stock does not become liable to pay until the second year, and makes his final payment of Income Tax in the eleventh year at the rate imposed for that year, whether higher or lower than the rates in force when he took up the investment.