HC Deb 08 July 1924 vol 175 cc2080-4

For the purpose of enabling deductions from revenue receipts of expired capital outlay on inherently wasting assets to be allowed by the additional Commissioners claims in respect of those deductions shall be included in the annual statement required to be delivered under the Income Tax Acts of the profits and gains of any trade, manufacture, adventure, or concern, and where such a deduction from the revenue receipts is made, and has been made, from the commencement of the actual employment of the inherently wasting assets in seeking profits, or during a period of not less than three years to the end of the usual financial year of the particular trade, manufacture, adventure, or concern, last prior to the year of assessment, and provided such deduction is so made as to prevent the same being available as profits, the additional Commissioners in assessing those profits and gains shall make such allowances in respect of these claims as they think just and reasonable.

For the purpose of this Section the term "inherently wasting assets" means assets which necessarily waste in the process of seeking profits. Provided always that such wasting assets are not the value of transferred rights to future profits or increase which would have been chargeable with Income Tax if no transfer of such rights had been made.—[Lieut.-Colonel Pownall.]

Brought up, and read the First time.

Lieut.-Colonel POWNALL

I beg to move, "That the Clause be read a Second time."

Mr. Basil Peto, then a Member of this House, dealt with this question in the corresponding discussion last year. In view of the fact that there are 12 or 14 proposed new Clauses on the Order Paper, I propose to be quite brief, and shall not go into the matter at any length, although it is one of those very difficult technical questions which, when once started, may go a long way. A Royal Commission sat five years ago largely upon this question. If I remember rightly the Financial Secretary to the Treasury was himself a member of the Commission, and to the best of my recollection signed this Report winch I am going to quote. No doubt. I shall have his sympathy. What the Report said was that Subject always to the limitation that their life falls short of 35 years, we recommend that an allowance shall be given in respect of all inherently wasting material assets which had been created by the expenditure of capital such as buildings and foundations.… In every case the allowance should be calculated by reference not to the absolute but to the relative liability to waste. This was recommended by the Royal Commission. A great majority of the recommendations have been carried into effect. On this particular question nothing, to my knowledge, has been done. There is a further point. Some years ago, in 1884, there was a case which was heard in the Queen's Bench Division, and the Court held that no deduction from trade profits could be made in respect of premium paid in connection with the purchase of leases. A certain firm were tenants of a large house in Liverpool Street, City. Apart from the rent they paid £10,000 premium for a 10 years' lease, and asked to write off £1,000 per year for 10 years. This was refused Q n the ground that the £10,000 was capital transaction, and that only the annual value of the house could be deducted.

This Clause, obviously, is not of a party character. As I have just indicated, I hope to have a measure of support from the Financial Secretary to the Treasury. Also I am glad to see that my right hon. Friend the Member for Camborne (Mr. Leif Jones) has a similar Clause down on the Paper. A dozen years ago his leader, the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George.), when Chancellor of the Fxchequer, said, dealing with this matter: There is here a real case, and it is one that has got to be dealt with. It has not been dealt with. Twelve years have elapsed since the right hon. Gentleman the Member for Carnarvon Boroughs made that statement. Four or five years have elapsed since the Royal Commission sat. I know quite well it would be hardly possible to expect this Clause as it stands to be accepted by the Government. What I do ask is that they will show sympathy, and say whether they cannot set up a Treasury Committee which will go very exhaustively into this extremely complicated question, consider the various interests involved, and see whether it is not possible to do something in regard to what is at present a serious injustice to a large section of the business community.

Mr. LEIF JONES

I do not propose to argue the merits of the case. I think they are perfectly familiar to Members who have followed the question in the past years. It is really unnecessary to argue it, because I do not think anyone will be found to defend the justice of taxing wasting assets for Income Tax on the same basis as if the assets were not so. For the last 15 years almost every Chancellor has in turn promised to deal with the question in the coming year, but political events have intervened to prevent the fulfilment of the promise. So it has been during the last year. Last year the Chancellor of the Exchequer promised that a full inquiry should be made, and, if possible, satisfaction should be given. An election has taken place and a new Chancellor of the Exchequer is in office, and I hope that he, too, will give us a sympathetic answer, and, if I may say so, that he will be able to fulfil the promise that he makes.

The question, I venture to say, is more urgent than ever before. These things did not matter much as long as the Income Tax was 5d. or 6d. in the £. But grievances that passed unnoticed then become intolerable when you are dealing with an Income Tax level of 4s. 6d. or 5s. in the £. From the point of view of Income Tax, which I regard as the greatest instrument for raising money that the Government has ever had in its hands, which I have defended as an alternative to the Capital Levy—for I believe that in Income Tax we have the most powerful means of raising revenue for the State that the Government can have—it is essential to remove these small injustices which may grow to large ones, and which create grievances in the minds of the taxpayers. The matter is far more urgent than ever before. I beg the Chancellor to have the matter looked into, and see whether we cannot put this grievance right before another 12 months is over.

Mr. GRAHAM

Those who have supported this Motion have raised the question to which the Royal Commission of 1919 devoted much attention. Our reply is bound to be sympathetic in the nature of things. The Royal Commission drew attention to the wasting assets, and recommended that no allowance should be made where the life of the wasting asset is 35 years or longer, but short of that period, they recommended that there should be certain proportional allowances; and that the existing depreciation allowances in the case of factories, mills, and other establishments should presumably disappear, and be replaced by a more comprehensive scheme. Another recommendation was that this should not apply to any case of proprietorship of the natural resources of the country.

I think I have said enough to show, as has already been indicated, that this is a very large problem, and clearly if this New Clause were adopted we should require a revised scheme. The Chancellor of the Exchequer authorises me to give this promise. Recognising, as we do, the injustice, we are willing to undertake that there should be an investigation of this matter. I do not think it is necessary to appoint a Treasury Committee. In the light of what has been recommended by the Royal Commission I think this question might be dealt with by the Board of Inland Revenue. I will undertake to have this matter looked into without delay, and I hope, if we are in office next year, we may, without pledging ourselves to any specific thing now, be able to place something on the Order Paper.

Question, "That the Clause be read a Second time," put, and negatived.