§ After the date of the passing of this Act any applications made for the purposes of section twenty-four, sub-section (1), of the Finance Act of 1923 shall take effect as though the words "six years" were substituted for the words "three years."—[Sir Henry Buckingham.]
§ Brought up, and read the First time.
§ Sir HENRY BUCKINGHAMI beg to move, "That the Clause be read a Second time."
It would be fitting perhaps, that the last new Clause to be proposed for this Finance Bill of 1926 should be an effort to acquire a simple act of justice which would cost the Exchequer nothing at all except the satisfaction of granting it. In the Finance Bill for 1923 the then Chancellor of the Exchequer gave a concession under which the taxpayer who had made a genuine mistake in submitting his return for Income Tax was given power to make application to the Commissioners of Inland Revenue for relief within three years after the year of assessment. I need not trouble the Committee with an account of how this concession was gained, but I think the Committee may rest satisfied that the 198 Chancellor of the Exchequer of that time was satisfied with the obvious argument that the State has no right to extort taxation from any subject which is not due or is in excess.
I am asking the Chancellor of the Exchequer to extend the time of application to six years. I do not see why any limit should be placed upon the time for rectifying a mistake of this kind, but I have in my proposed new Clause fixed six years as the limit of my request, for certain definite reasons. The first is that, by another Section of the Act of 1923, the period of application for relief, which formerly had been three years, was extended to six years. This relief applied to adjustments arising out of successions, discontinuance of business, Dominion Income Tax, and so on, and it had been applied to cases of mistakes made under Schedule D. It seems to me illogical that mistakes which are made tinder one Schedule should be more generously, treated than mistakes made under another Schedule. My second reason is that, also in the Act of 1923, the State took power to make amended increased assessments for a period of six years after an assessment had been made on the taxpayer. I am only asking now that the taxpayer should have the same right as the State to rectify mistakes over the same period of time. There is still another reason, and that is that six years is the period within which a claim for the recovery of money paid by mistake can be made by an ordinary commercial firm.
I have tried to show that six years is a period to which there is justification for asking the Committee to agree. These mistakes are by no means uncommon, and we can all sympathise with them in view of the involved condition of our Income Tax law. Unfortunately, when these mistakes are made, they do not end simply with the payment by the taxpayer of an excessive amount of Income Tax, for there is another result which appears almost incredible. When once an assessment for Income Tax has become effective, that is to say, if no appeal has been made against it, in the following year the Super-tax assessment is bound to follow the Income Tax assessment for the previous year; so that in the result the taxpayer who has unfortunately made a mistake in his return not only pays an excessive amount of Income Tax, but on the top of that pays Super-tax as well. 199 Therefore, I think I am not asking too much, and I hope the Committee will agree with me when I invite the Chancellor of the Exchequer to extend this privilege for a period of six years.
§ Mr. CHURCHILLI am prepared to accept the principle that the period during which an error may be corrected shall be extended from three to six years, but I can only do so on the basis that we start square, and that it is not retrospective. Should any errors be committed—which we trust may not be the case—they will be rectifiable within a period of six years. If that will meet my hon. Friend's view, I will take steps to have an Amendment put down for inclusion during the Report stage.
§ Mr. SPENCERSuppose an error has been made two years ago, and there is still a year's grace to run and the error is found out in two year's time instead of one, will the person who made the error be entitled to the concession in respect of six years?
§ 12.0 m.
§ Mr. CHURCHILLWe are not altering anything in the past. The past is gone, and no change will be made in regard to it. It is only from the time the Bill passes that the six years period will run.
§ Sir H. BUCKINGHAMI am very much obliged to the Chancellor of the Exchequer. Will the Clause, when drafted, apply also to mistakes made under Schedule E?
§ Mr. SPENCERIt seems to me that we are introducing an anomaly.
§ Mr. CHURCHILLThe hon. Member for Broxtowe (Mr. Spencer) will see when we put the Clause down, after all the mature consideration that the draftsmen can give to it, that his point will have been fully safeguarded. The hon. Member for Guildford (Sir H. Buckingham) asks whether the six years principle will apply to mistakes under Schedule "E." There is no necessity for that, because there is already on the Statute Book a provision with which he is, no doubt, familiar—Section 18, Sub-section (5), of the Finance Act, 1922—which enables the taxpayer within the usual time limit of six years to obtain an 200 adjustment of excessive assessment under Schedule "E."
§ Sir H. BUCKINGHAMI beg to ask leave to withdraw the Amendment.
Motion and Clause, by leave, withdrawn.
§ Sir H. BUCKINGHAMThe next New Clause which stands in my name—(Relief grouted for error made in returns to be extended to Schedule E)—is consequential. In view of what has been said by the Chancellor of the Exchequer, I do not propose to move the Amendment.