HC Deb 21 June 1926 vol 197 cc173-84

No gift made at the absolute discretion of the donor to give or to withhold such gift shall be deemed for the purpose of levying Income Tax to be part of the income of the recipient of the gift, notwithstanding that the donor may have made a similar gift to the recipient about the same date in previous years, nor that the motive of the gift may he reasonably believed to be the approbation of the donor for the exertions of the recipient in religious teaching or ministration.—[Lord H. Ceci1.]

Brought up and read the First time.

Lord H. CECIL

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

This Clause will, I hope, clear up one of the obscurities or fancied obscurities, which stand in the way of our discussions when the Finance Bill comes up every year. We have had other difficulties in the course of this Debate. We found it difficult, earlier in the evening, to decide what were the limits of the exemption of charities. In this case, I desire to lay down what I conceive to be already the law, if properly interpreted, or, at any rate, already the law in principle, in respect to free gifts as distinguished from incomes recoverable according to law. If I understand the law now, if one person gives to another a free, voluntary gift, absolutely at his discretion, that is not income liable to Income Tax. Income Tax is not levied upon it. It does not seem to me that it makes any difference if it is the habit of a person to make such a present once a year, or at a particular period. I believe that is already recognised in almost every case, and Income Tax is not levied on any such free gift. I propose, at any rate, to make the matter quite clear by declaring that and, therefore, removing all ambiguity about it, but in the last words of my Clause I deal with a particular case which arises in respect to ministers of religion, who do receive presents from time to time, of all sorts, some of them periodical, some of them occasional, some of there, apparently, liable to tax, and some of them, apparently, exempt from tax.

I want to lay down a general principle covering all such cases, which will clear them all up and make the whole matter perfectly plain. One difficulty has, I believe, already been under discussion, when I was, unfortunately, absent, not anticipating that that particular Amendment would then be reached, in respect to Easter offerings. That, of course, is only one case, but that is a case which is believed to be the subject of taxation because it has been held by the Courts to be a profit accruing in respect to an office. I do not dispute that if the thing were really a profit in respect to an office, it would be liable to taxation according to the existing policy of the law. What I am anxious to do is to save gifts which are truly gifts, and if I ventured to criticise the House of Lords' decision, it would not be on the point on which the Noble Lords gave their decision, at considerable length, that is to say, on the question whether or not an Easter offering accrued in respect to the office. That may readily be conceded. The real doubt which occurs to anyone who has studied the question is: Was it really a profit or a gift? And that is the point, amongst others, which I want to raise by my Amendment.

I want to safeguard all gifts to ministers of religion which are truly gifts and not profits. A gift, as I conceive it, is a thing absolutely in the discretion of the donor, and that ought to be exempt from taxation. It is not income in any real sense of the word. A man cannot count on it, it may be given one year and withheld another, the giver may die or change his mind, and in one way or another it may be lost. It is an absolutely uncertain thing. It is not in any respect a profit which accrues in respect to the exertions of the person. A profit is given by somebody else because of those exertions, and because it depends upon the exertions and results from them. That is the real distinction of which the House of Lords' decision takes no account. The man who earns a profit in business by his exertions in business counts upon it in consequence of those exertions. That is what they are made for. He can depend upon them. Similarly, in case of investment, a man counts upon the interest which is coming to him because he knows that money can always command interest when it is properly invested. In all these cases the profit is earned and depends upon the person's exertion for prudence. A gift is just opposite. It depends upon the goodwill of some other person. It is not income at all; it has come from outside. It comes or may not come. At any rate, the recipient has no control whatever over it. It is not a thing upon which he can count. A man can count upon profits because he knows that by such and such exertions profits to a certain amount accrue, but this is a gift which is dependent upon the goodwill and the generosity of the person who gives it. I note that the Attorney-General is in his place, and I believe that what I say is the true policy of the law as it stands now. I do not believe that my words in the proposed Amendment really change what is the policy of the law. They do change the application of the House of Lords decision, but that only suggests that the House of Lords has made a mistake. Parliament has power to correct errors in the case. There are many precedents for the Courts intervening to correct the errors which Parliament have made. I suggest that here is an opportunity to clear up the whole matter. If my words are not the right words, by all means let them be amended and let us have a true definition of what is the distinction between a gift which is not liable as income, because everybody agrees that there are gifts which are not liable. Let that be laid down as a general proposition. If it be laid down as a general proposition I think that, if laid down in language which is lucid, it will be found quite impossible to maintain that a minister of religion who receives gifts in respect of his ministerial teaching should be taxable. The Inland Revenue are in this matter suffering from confusion of thought—as they so often are. In all these discussions the Board of Inland Revenue do not wish to say anything clearly. "We cannot do it," they say; "if we did we feel quite sure it would come out expensive." What we want is a clear law of taxing in which whatever principle Parliament may adopt should be logically stated and logically applied. This is a step in that direction. It was as an attempt to make a beginning with respect to these free gifts that this Clause was put down. It does not, in my mind, alter the policy of the law in any degree whatever. I cannot imagine any material loss of revenue from it, and I hope it will be accepted.

Mr. CHURCHILL

I am advised, and in a matter of this kind I must add the reserve that I am speaking in the presence of the Attorney-General, that there is not in fact that need for a new and clear and precise definition of the law in respect of free gifts and their liability to Income Tax as would appear from the speech of my Noble Friend. A mere present from one person to another, not being a sum in respect of service accruing to the recipient by virtue of his office, would not under the existing law normally be assessable to Income Tax.

Lord H. CECIL

What is "accruing by reason of his office"? Is it a, profit—a thing upon which he can depend by his own exertions?

Mr. CHURCHILL

It is a sum of money; and these sums of money are very accurately related to particular persons and their services in many cases. A gentleman who assisted me in this matter opened "Crockford's Clerical Directory" for the year 1925, out of which the two following cases immediately arose. The income of one living, X, was shown at £190, including £1 from Easter offerings. On the very next page there was another living, Y, with an income of £432, which includes £50 from Easter offerings. Can it be seriously contended that the Income Tax should not take into consideration these real, regular and recognised aggregates of these respective incomes, and that a differentiation should be introduced into the tax of these two reverend gentlemen which would give relief in respect [...]. £50 to the one who had the larger income and a relief of only £1 in respect of the smaller? The old test which my Noble Friend has been asking for has very frequently been explained. It is not whether a payment is voluntary or compulsory, but whether the payment is in the nature of an emolument accruing from the exercise of an office or employment. No doubt, of course, there is a border line, as there is to all these matters, but here again I think the law has arrived by its practice and experience at very clear and plain judgment. The Lord Chancellor, giving judgment in the case of "Cooper versus Blakiston," in 1909, said: The only question is whether or not the sum given by the parishioners to the vicar at Easter is assessable to Income Tax as a profit accruing to him by reason of such office. In my opinion, where a sum of money is given to an incumbent substantially in respect of his services as incumbent, it accrues to him by reason of his office. Here the sum of money was given in respect of those services. Had it been a gift of an exceptional kind, such as a testimonial or a contribution for a specific purpose, as to provide for a holiday, or a subscription peculiarly due to the personal qualities of the particular clergyman, it might not have been a voluntary payment for services, but a mere present. In this case, however, there was a continuity of annual payments apart from any special occasion or purpose, and the ground of the call for subscriptions was one common to all clergymen with insufficient. stipends, urged by the bishop on behalf of all alike. What you chose to call it matters little. The point is, what was it in reality? It is natural and in no way wrong that all concerned should make this gift appear as like a mere present as they could. But they acted straightforwardly as one would expect, and the real character of what was done appears clearly enough from the papers in which contributions were solicited. This passage from that judgment shows the Committee how lucidly and reasonably the law on this subject, which is admittedly a difficult subject, has been threshed out. My Noble Friend, in his Amendment, goes far beyond the scope of Easter offerings, and seeks to lay it down that any gift made at the absolute discretion of the donor to give or withhold it shall be deemed, for the purpose of Income Tax, not to be a part of the income of the recipient. It seems to me if that were laid down that a very largo number of transactions of an annual and continuous character -might come to he regulated by a system which would still rest in the absolute discretion of the donor to confer or withhold, but which, nevertheless, would be so far taken into consideration by the recipient that he would be willing to discharge his duties with customary regularity, this very arrangement might be very detrimental to the revenue. I am advised that the Amendment of my Noble Friend would cover voluntary payments by employers to employed, Christmas bonuses voluntarily paid to employés, payments for services and emoluments in the case of Roman Catholic priests and Nonconformist ministers. I do not know whether that is in my Noble Friend's mind. After a clear and impartial consideration of the matter I am forced to adopt an attitude of general intolerance, and I cannot consent to broaden and extend in this way a principle in regard to which, although there are many anomalies and difficulties, the Income Tax is being collected in a manner which has the sanction of custom and the highest authority of the land.

Sir H. SLESSER

I wish to explain that what I am going to say in regard to this Amendment I say on my own responsibility, because this happens to be one of the few occasions on which my views are not quite in accord with those of my hon. Friends. I feel, however, that I am entitled to say a few words more particularly in regard to the case of Cooper v. Blakiston, in which there is great confusion of thought. In the very judgment which the Lord Chancellor gave, he starts by speaking of the offering as a profit, and at the end of the judgment he winds up by saying: It was natural and in no way wrong that all concerned should make this gift appear as like a mere present as they could. So that he is using both the word "gift" and the word "profit." The fact that this grievance is brought up year after year shows that many people both in this House and outside feel very strongly that the law with regard to Easter offerings and gifts for religious ministrations is in a very unsatisfactory position. It may be that a gift is given to a person who would not receive it were it not that he held a particular office. The person who pays the money has often paid Income Tax, and he makes it as a gift just as if it were given to a relation or a friend every year at the same time as a gift. In that case the mere annual repetition of the gift to the same person would not make it liable to tax. It is only by straining the construction of this word "office" and applying it in a way that it should not be applied, that persons have been made liable to this taxation.

Last year we had the argument that the gift was mentioned in Crockford, and this fact was brought out again this evening by the right hon. Gentleman. I cannot understand why the mere fact of its being mentioned in a directory can affect the law in this matter. It is true that persons do receive these gifts annually, and the amount they receive has been stated from time to time in this clerical directory, but that settles- nothing. Moreover, I would say that, whether Blakiston v. Cooper be right or not, when people make gifts to the poorer clergy, even though they make them to a special clergyman at a special time, it is inexpedient on public grounds that that assistance, to a man who, in most cases, is very poor and much in need of money, should be taxed, I would go further, and say it is very desirable that we should encourage these ministrations and teachings, and that they are not a fit subject-matter for taxation at all. I would put them in the same category as we do insurance. We exempt from taxation insurance premiums on the ground that it is wise to encourage people to insure, and they escape taxation accordingly. As a matter of principle, apart from the question that this is in fact a gift, we ought to treat these gifts to the clergy as we treat contributions for the purpose of insurance. [HON. MEMBERS: "Five!"] No, it is spiritual life insurance, or insurance of spiritual life. At any rate, I think the Committee will see the analogy between insurance and gifts of this particular kind. There are other cases. An hon. Member has just been urging the claims of athletic clubs to exemption from certain taxation. Surely, if it is right to encourage athletics,it is also expedient to encourage the ministrations of the clergy.

Mr. CHURCHILL

I rejected that proposal.

Sir H. SLESSER

This Government, who have already despoiled the clergy in their tithe legislation, should be the first to wish to do something to redress the balance by giving at least the very small exemption which this proposed new Clause would give.

Mr. BARR

I rise to oppose the Second Reading of this Clause, and it is a peculiar pleasure to me to support the Chancellor of the Exchequer against one of my Front Bench leaders. I take this action on the ground of religious equality, which to me means not only that all citizens are equal in matters of religion before the law, but also that there should be equality as between Church and Church in this matter. It is well known to students of history that in Scotland we long resisted the observance of Christmas and Easter Day, and a good deal of the persecution that we suffered was because we took that attitude. I am glad to say that that stern attitude has passed away, but Easter is not yet universally observed in Scotland, and certainly the ministers there do not receive any Easter gifts. The Noble Lord the Member for Oxford University (Lord H. Cecil) pointed to the uncertainty of these gifts. It was something, he said, that you could not count upon; you could not depend upon it. I think that that is applicable to the wages of a great many of the working people of this country, many of whom are called upon to pay Income Tax.

I would apply it still further. The Noble Lord, last year, when he was speaking on this subject, took the instance of an incumbent who was not acceptable. His gifts would go down and his salary would go down, if he were not as successful a preacher as the man before him had been. He would be paid according to output, and, consequently, his emoluments would go down. The Noble Lord showed again to-night, in the same sense, that it was quite uncertain, that it could be given or withheld. I would take the case of not a few Nonconformist ministers in this country, who are entirely dependent upon what happens to be put into the collecting box Sabbath by Sabbath. They have no contract nor any fixed sum and are entirely dependent on free-will offerings, the gifts of the people. I take my own case. In one of my charges the office bearers were under no obligation at all, but at the end of the year, according to what might be in the fund, I might receive an additional £50. If my conscience had been so easily fixed as is suggested here, I might say, "This is a gift," but any man, who intended to be strict and straight with the Exchequer and the Government, would count that as being an addition to his salary and pay the Income Tax upon it. That is how I always felt. It is because a man is in that office that he receives the particular gift. Reference has been made to hardships. and my right hon. Friend has referred to the Tithes Bill. At least in the Tithes Bill the payment of rates became general in a sense it had not been and contrary to the Act of 1836, which put the payment of rates on the clergy.

I say it without any offence, but it is the Church, which is already receiving the greatest benefits from the State and has the recognition and endowments of the State, that is to reap the greatest benefit from this Clause. With regard to the hardships to the clergy, no one sympathises with them more than I do in regard to the very insufficient salaries that they are paid, but at the same time they gain the benefit that all citizens gain if they do not reach the Income Tax limit. Last of all, I oppose the Clause because it lends itself to evasions very readily, not only in regard to Easter offerings but to all offerings. I can conceive schemes under which ministers would get salaries in the form of offerings arid not under any form of contract. I would like to congratulate the Noble Lord on his apt quotation of scripture, but I have a verse that I should like to quote to him. It comes from the Gospel of St. Mark, 7th hapter, 11th verse:— But ye say, If a man shall say to his father or mother, It is Corban, that is to say, a gift, by whatsoever thou mightest be profited by me"— so that the Noble Lord's distinction between a gift and a profit falls— he shall be free. That verse prophetically calls attention to the very Clause the Noble Lord is moving here to-night, and it goes on to pass the severest of condemnations on those who put it in the name of a gift and seek to escape their obligation to the State and to the home. This verse is prophetic, and bears directly upon this very occasion, this very Clause which is before us. The Noble Lord said that it would not be any material loss, that it was a small thing; but small things deter-mine very great questions. I believe that Ship Money in the case of Hampden was £1 11s. 6d., not a very material loss to the Revenue at all, but involving a considerable question. If there is one institution in the country that should have a conscience against evasion, it is the Christian Church. If there is one set of people that should not seek to get off their obligations to the State by phrases about gifts, Easter offerings and others, in order to get round the law, but should set an example to the people if this country, it is the clergy of this country and the Churches.

Lord H. CECIL

The hon. Gentleman who has just spoken began by saying he was in a peculiar position because he was about to express disagreement with something that had fallen from a Member of his own Front Bench. If by "peculiar" he meant "exceptional," I really think he is mistaken, because I have observed a good many Members of the Labour party on the back benches express disagreement with those who sit on the Front Bench, and indeed I think the intoxicating lust of contradicting the Front Bench so far misled the hon. Member that he thought he was speaking about an Amendment he was not speaking about but a different Amendment, and he entirely misapprehended the character of the Amendment actually under discussion. We are not discussing an Amendment specifically relating to Easter offerings.

Mr. BARR

I think it was indicated from the Chair that that Clause was withdrawn as this would cover the particular question.

Lord H. CECIL

This covers a much wider question. It covers all the income of Nonconformist Ministers and Roman Catholics, and the Chancellor quoted as an atrocious consequence of the Measure that it would relieve the Roman Catholic clergy, one of the things he apparently regarded as a thing conclusive against any such Amendment. Then the hon. Member went on to quote Scripture and lamentably failed to complete the quotation or he would have found that a reference is made to the Commandment, "Honour thy father and thy mother." I do not think it is suggested that any of us should honour the Board of Inland Revenue. Unless we apply the doctrine that we owe everything to the Inland Revenue that we owe to our parents the quotation breaks down.

I do not desire to press the matter very much further, but the right hon. Gentleman and the House of Lords decision both pass over the true distinction between a gift and a profit. Nothing is said in the House of Lords judgment about profit. A great deal is said about what accrues in respect of a particular office, but the true distinction which really ought to be the basis of the exemption of taxation is whether the gain made depends on the man's own action or what he can do, or whether it comes to him from outside and is therefore the uncertain act of goodwill of some other person. That is the really important distinction, because if a thing is a mere gift coming from outside—a present—the man cannot reckon on it. It is not income in any sense whatever. He does not know from year to year what the money he will have to spend will be. All that enormously diminishes the amenity and value of whatever he receives.

It is reasonable, therefore, that taxation should not be levied on what is so precarious and what gives him so little of the assurance and tranquility of mind that an assured income gives. The House of Lords judgment said nothing about that. They assume that profit covers a gift. I do not know who were the learned counsel arguing before them, but I should have thought that was the very first point to take exception to. A profit is quite a different thing from a gift. A profit is a thing which is earned and dependent on the action of the person himself; a gift is something that comes to him from outside. I am sure that is the true, logical and reasonable distinction, a distinction which justifies the freedom given to presents which come from time to time and yet secures a true payment of income which cannot be evaded.

The case which the right hon. Gentleman put of the employer and the employé using this by way of evasion is an unreal case, because it would at once be pointed out that the employer could not fail to make an annual gift or he would lose the services of the employé; that it was not a true voluntary action, and that he was really under the requirement of making a payment or he would lose the services of the employé. Therefore, it is a salary and not a gift, and it is only a colourable gift. It is quite clearly shown that the decision in respect of Easter offerings really depends upon a false principle, and we ought to persist year after year in raising this question until we can prevail upon the Treasury to put the matter in a logical form, laying down by some Clause what is the principle that governs this matter, instead of going on from year to year in this dreadfully slipshod fashion, no answer being given to the, argument relying upon the vote given, without much intelligent apprehension of the question involved, being in support of the Treasury.

11.0. p.m.

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