§ Where the income which any individual is required under the Income Tax Acts to include in a statement of his total income from all sources for the purposes of Income Tax or Super-tax for any year includes both—
- (i) interest received without deduction of Income Tax in respect of securities (in this Section referred to as "original securities") which have been accepted as the equivalent of cash in payment for fully-paid allotments of Four pounds per Cent. Victory Bonds or Four pounds per Cent. Funding Loan, 1960–90 (in this Section referred to as "substituted securities"); and
- (ii) interest taxed by deduction in respect of such substituted securities;
and the amount of the interest so included exceeds the full amount of the interest for a complete year on the original securities; then, if that individual so requires, the excess—
- (a). shall not be taken into account in ascertaining the total income from all sources of that individual for that year for the purposes of Income Tax or Super tax; but
- (b). shall nevertheless be chargeable to Income Tax or Super-tax for that year at such rate or rates and subject to such reliefs, if any, as would be applicable if such excess constituted the highest part of an income equal in amount to the amount of the total income of that individual exclusive of such excess. — [Mr.Chamberlain.]
§ Brought up, and read the first time.
I beg to move,That the Clause be read a second time.The rights of conversion in connection with the new Loan will have the result that certain people whose tax was not deducted at the source will convert into a security where the tax is deducted at the source. Where the tax is not deducted at the source, it becomes payable a year later than where it is deducted at the source, and, therefore, the mere change from one form of security into the other would cause the interest on the security for two years to become chargeable in a single year. This might have been dealt with by exempting one year from the tax altogether. That would be an obviously extravagant thing to do, and unfair as 300 between tax-payer and tax-payer. The tax must be paid. But the transfer would have another effect. In certain cases it would cause the Income Tax payer's income for that particular year in which two years' interest became chargeable, to go to a higher point, and become chargeable on a higher scale. The object of this-Clause—I am not sure whether I am making it clear; it is a little complicated —is to provide that, where by the mere accident of conversion the man might become subject to a higher rate of tax, he shall not be charged at a higher rate.
§ Clause accordingly read a second time, and added to the Bill.