HC Deb 02 July 1924 vol 175 cc1413-9
Mr. D. G. SOMERVILLE

I beg to move in page 13, line 9, at the end to add the words Provided that any repayment made to any person who has taxable income shall not be lees by more than the standard rate of tax upon his taxable income than the amount that would have been repayable to him if he had no taxable income. I am endeavouring to correct a very apparent anomaly which I will endeavour briefly to explain. This Clause is introduced into the present Bill to give statutory authority to a method that has been in practice a considerable time by the Income Tax authorities in making repayments due to taxpayers arising out of earned personal and other reliefs due to them, or in other words the reliefs due to them as allowed under Sections 18 to 22 of the Finance Act, 1920. It will be observed that where a partial repayment of Income Tax takes place it is proposed only to repay at either the standard rate for that year, or at half the standard rate as the case may be, whereas it any person shows that he is not liable to Income Tax for the year a total repayment of Income Tax is allowed to him. Although on the face of it this may appear to be correct, it is possible that a taxpayer may have suffered on his dividends a small amount of tax at a rate exceeding the standard rate for the year, and this would give rise to an anomaly which may best be shown by a simple illustration as follows: Supposing "A" is married and has four children.

Mr. W. THOMAS

Is the hon. Member entitled to read his speech?

Mr. SOMERVILLE

This is a highly technical argument giving statistics, and I am obliged to read it. In this case the earned income during the year of assessment is £160. The unearned income received during the year of assessment is £200, upon which he has suffered tax by deduction amounting to £48.

The DEPUTY-CHAIRMAN

There is a Rule of the House that hon. Members may refresh their memory by a reference to notes, but not to read speeches.

Mr. PRINGLE

Then are we to understand that whenever a Minister reads a speech he is out of order?

Mr. D. HERBERT

Is it not the case that in the past an hon. Member has been allowed in the course of his speech to read certain portions of it containing details and intricate questions involving figures? Under these circumstances, may I submit that the hon. Member for Harrow-in-Furness (Mr. Somerville) has a right to read passages in explanation of his Amendment?

The DEPUTY-CHAIRMAN

The hon. Member is perfectly right. I was indicating that the hon. Member could use his notes for purpose of giving figures to the House.

Mr. SOMERVILLE

I am sorry to trouble the Committee with these figures, but I must refresh my memory by reading them. "A" lodges a claim for repayment of Income Tax, and his for that year is as follows: The total income is £360. The earned allowance of one-tenth of £160 is £16, and the personal allowance £225. For four children the allowance is £117, making a total of £358, leaving a balance It will be seen that "A" is liable far tax upon £2 at 2s. 3d. in the £, namely, 4s. 6d., and he would possibly assume that he was entitled to a repayment of the difference between this sum and what he had suffered, namely, £48, or a net repayment of £47 15s. 6d. What he actually receives, under this Section, is not £47 15s. 6d. but the amount of £44 15s. 6d. arrived at as follows: Total allowance due to him, £358; less untaxed income set against these allowances, £160; leaving a difference of £198. There will then be repaid to him £198 at 4s. 6d. (which is the standard rate), £44 11s., and £2 at 2s. 3d. (which is half the standard rate), that is, 4s. 6d. making a total of £44 15s. 6d. It will be seen from these figures that he has now received his repayment calculated upon the standard rate, or half the standard rate, "as the case may be."

Now take the case of another man with identically the same allowances due to him but earning just £2 less. There would be no Income Tax payable, and this gentleman would be able to claim back the whole of the Income Tax he suffered—in the present case £48—and it will be seen that, merely because his income is £2 less, he saves Income Tax amounting to £4s. 6d. as against the other man, who could only reclaim £44 15s. 6d. I admit that I do not think any actual alteration of the principle of the Section is feasible, but it may be possible to introduce a marginal relief Clause to provide that persons on the border of this Section—that is to say, with only a very small amount of Income Tax to pay—should not suffer as compared with persons who just escape taxation altogether, and that is why I move the Amendment.

Mr. GRAHAM

I hope that the hon. Member will not press this Amendment on the Committee. After the technical Debate we have just had it would ill-become me to give the Committee a detailed discussion of this Clause, which, as hon. Members know, deals with the rate of tax at which repayment in respect of deduction or allowance under Part II of the, Finance Act, 1920, are to be made. If effect were to be given to this Amendment it would involve an elaborate calculation in terms of two-fifths of a penny in the—or something like that. While it is true that perhaps this proposal might give relief to the extent of a few shillings or pence in a year in which the rate of the tax is reduced it is true that in practice they get a benefit in the years when the Income Tax is increased. This benefit the taxpayers obtained during the time when the Income Tax hounded up from 1s. 6d. to 6. in the £ That being so, it can hardly be contended that there is any substantial injustice now, if there is an anomally of a few shillings or pence while the tax is being reduced.

The real objection to the Amendment is that it would be altogether unworkable as an administrative proposal. It would involve a review of all kinds of assessments for no good purpose whatever, because in the overwhelming majority of cases, only a few pence or one or two shillings one way or the other would be at stake. Although there might be some kind of marginal relief under this Amendment there would be disadvantages which I will not take up the time of the Committee explaining. If the officials of the Department were to be saddled with all these administrative details it would seriously delay the repayment of Income Tax due. I have no hesitation in assuring my hon. Friend that the taxpayers will benefit under our proposals, and I am afraid they would be hindered under this Amendment. I do not think I need to give any further explanation, and I ask the hon. Gentleman not to press his Amendment.

Amendment negatived.

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

Sir THOMAS INSKIP

I understand that this Clause merely perpetuates what has long been the practice of the Inland Revenue Department, but undoubtedly in these days of large variations in the Income Tax, especially when it is on the downward scale, it works hardship in many individual cases. I have a correspondent in Bristol who says he owns £100 worth of shares in the General Electric Company, which declares a dividend once a year in June. The dividend has been deducted at the rate of say, 6s., and in the last year at 5s., but repayment is only made to him on the 5s. or the 4s. 6d. rate. The result is that although this taxpayer is entitled to relief under the Income Tax Acts, it is more convenient to the Inland Revenue to have one uniform rate of repayment. I think that is an injustice, and I am surprised to hear that it has been the practice of the Inland Revenue Department.

I called the attention of the Financial Secretary to the Treasury to this matter, and he replied that he had no doubt the subject would be fully discussed in the Debates on the Finance Bill. I am afraid I am not sanguine enough to expect that this matter is considered to be sufficiently serious to vote against the Government, but, not with standing that, I greatly regret that this is the practice of the Inland Revenue Department. The Financial Secretary spoke about a few pence or a few shillings being involved. I am afraid that the Treasury are so accustomed to dealing with millions that, in their view, a few shillings and pence do not matter, but to people with incomes varying from £220 to £150 these small amounts are of some importance. The income of this particular correspondent of mine has never exceeded £250, and he is taxed more than he ought to be because the system adopted is more convenient for the Inland Revenue, although Parliament intended that he should be exempt. I say that is an injustice, and this Clause ought not to be allowed to pass in its present form.

Mr. GRAHAM

I take it that my hon. and learned Friend would not expect me to pronounce upon an individual case from Bristol without looking through all the facts of the case.

Sir T. INSKIP

If I may interrupt the hon. Gentleman, I gave him an opportunity, because I sent him the letter some time ago, and, after a delay—of which I do not complain in the least—of nearly four weeks, he replied, sending back the letter, with no other comment than this, that the matter would no doubt be fully discussed during the course of the Debates on the Finance Bill, and not remarking upon either the justice or injustice of the practice.

Mr. GRAHAM

I must say quite frankly that I do not recall the details of the case, because I receive, as the Committee knows, very large numbers of cases every week. Everything, however, depends upon the sources of the income, and also upon the times during which that income is earned, together with certain grounds of relief. No doubt, that applies in this case, and, if my hon. and learned Friend cares to send me the case again, I could now give him a definite ruling upon it in the light of the Clause which we now propose to insert in the Bill.

Sir T. INSKIP

I have no doubt at all what the definite ruling will be. If this Clause is passed, the hon. Gentleman will reply to me that Clause 21 of the Finance Bill, which it is hoped will be passed into law when the Royal Assent is given, has made this practice of the Inland Revenue Department not only the customary practice of the Inland Revenue Department, but the law; and this gentleman will be taxed at the rate of 6d. for every of £1 dividend which he receives from this company. I have no doubt about the legal position if this Clause is passed. What I want to bring to the attention of the Committee is that it is an injustice that people should be taxed merely for the convenience—and, no doubt, it is a convenience to them—of the Inland Revenue officials.

Viscount WOLMER

May I ask whether the Government cannot consider this matter between now and Report, and see whether some addition to the Clause could not be made to meet the case which my hon. and learned Friend has brought forward? His case cannot be an isolated one; there must be hundreds of other men in the same position; and, although none of my constituents happen to have written to me on the subject, I do not think it is a matter which should be dismissed in quite the airy way in which it has been dismissed by the Government. I think the Committee would appreciate it if the Chancellor of the Exchequer would say that he will look into the matter between now and Report and see whether he cannot do something, to remedy cases of this kind.

Mr. SNOWDEN

The Noble Lord surely does not expect me to say that I, on the spur of the moment, can deal with the details of a particular case; but without giving any definite promise to the Committee. I certainly will look into the matter, and I shall be glad if the hon. and learned Member for Central Bristol (Sir T. Inskip) will submit to me the case which he has mentioned, in order that I may see whether it is a typical case.

Mr. D. HERBERT

We are very grateful to the Chancellor of the Exchequer for what he has just said, and, in the circumstances, I do not wish to press, as I was going to do, my opposition to this Clause; but I do hope that, if the right hon. Gentleman brings forward on Report this Clause in an amended form, he will be prepared thoroughly to justify it to the House, because, if I may respectfully say so, it seems to be a wrong principle altogether that, Where a man's income is taxed at 6s., and he is entitled to have his tax back, he should only get the tax back at the rate of 5s. I do not think that the convenience of administration in the Inland Revenue Department is a sufficient justification for that.