§ 56. Mr. HANBURYasked the Chancellor of the Exchequer why, under the agreement as to double Income Tax made with the Irish Free State, commencing with the financial year 1926–27, persons living in England and owning property in Ireland find that it takes a year or longer to get a refund of tax; and whether he can speed up the refund of taxes or, alternatively, whether he will consider cancelling the above agreement and returning to the old system of Dominion relief?
§ Mr. CHURCHILLRepayment of Irish Free State Income Tax under the double Income Tax Agreement made with the Irish Free State is a matter for the Revenue authorities of that country, who, I am sure, will attempt to meet satisfactorily any representations my hon. Friend may make to them in any case in which there appears to have been undue delay. I see no present reason for contemplating the cancellation of the agreement.
§ Colonel HOWARD-BURYCan my right hon. Friend say how the Clearing House that deals with double Income Tax between the two countries is working?
§ Mr. CHURCHILLI must have notice of that question.
§ 62. Sir FRANK NELSONasked the Chancellor of the Exchequer if his attention has been drawn to the assessment to Income Tax of the Banir Rubber Estates, Limited, whose actual profits since the company's incorporation in October, 1925, to 31st October, 1928, amounted to £26,477, but whose assessment to Income Tax is computed by the Inland Revenue Department to amount to no less a sum than £44,588; and whether he will state the basis on which this assessment was made?
§ Mr. CHURCHILLI have caused inquiry to be made in the case to which my hon. Friend refers, and I find that in accordance with the law the company has been assessed to Income Tax under Schedule D for the years 1925–26 and 1926–27 on the basis of the profits for those years, and for each of the years 1927–28 and 1928–29, on the basis of the preceding year's profits.
§ Sir F. NELSONIs it not a fact that this particular company is being asked by the Inland Revenue to pay more than it has actually made?
§ Mr. CHURCHILLMy hon. Friend has another question upon this subject, and perhaps I had better answer that question before he puts further supplementaries.
§ 63. Sir F. NELSONasked the Chancellor of the Exchequer ii his attention has been drawn to the hardship inflicted on certain companies whose profits from whatever cause show a steep decline in 1928 owing to the recent changes in Income Tax law; if he is aware that in many instances the Income Tax authorities are demanding tax in sums larger than the actual profits; and whether he will consider inserting provisions in the Finance Bill of this Session ameliorating this condition of affairs?
§ Mr. CHURCHILLI assume that the type of case which my hon. Friend has in mind is the exceptional one of a business whose profits are relatively large at the outset and subsequently diminish. In such a case the result is that for the early years Income Tax becomes chargeable on a total amount greater than that of the profits actually made. Conversely, in the far more general case of the business whose profits are relatively small at the outset and subsequently increase, the Revenue receives tax for the early years on a total amount smaller than that of the profits. This position, which is an inevitable consequence of any basis of liability other than the current year basis, is on the whole very favourable to the taxpayer and correspondingly adverse to the Revenue. In so far as the matter is affected by the legislation which changed the basis of assessment for Income Tax under Schedule D from the three years' average to the preceding year, I would again point out that over the whole field of industry taxpayers have gained very considerably from that change. While provision has been made, so far as reasonably possible, to meet classes of cases in which, owing to exceptional circumstances, hardship might arise, it was impossible to prevent some isolated cases in which a change of this far-reaching character would be unfavourable to the taxpayer. In these circum- 546 stances I regret that I do not see my way to take any action in this matter.
§ Sir F. NELSONMay I ask the right hon. Gentleman if he can recall a similar case to which I drew his attention last December, namely, the case of a rubber producing company which was asked to pay in Income Tax a sum amounting to nearly twice the total of its net profits, and regarding which, I understood, the right hon. Gentleman was kind enough to reply that on the basis of further accounts the liability would be much reduced?
§ Mr. CHURCHILLI recollect a question being asked on that subject, but I cannot pretend to charge my memory with the details of the answer.