HC Deb 19 June 1930 vol 240 cc700-5

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


I should like to know why this Clause should have been put into this Bill, and if it is a concession to the taxpayer, in what way it is a concession. I take the Clause to mean that the amount of Surtax for the year in which a person dies shall be not more than the Income Tax would have been if the Income Tax rate had been kept at the level of the year before the death of the person, but in reading the Clause I am bound to say that I have a suspicion that there must be some mistake in its drafting. It says: The amount of Sur-tax payable in respect of the total income of an individual"— And then, a line or two further down, it says: which would have been payable if Income Tax had been chargeable. Why does it say in the first line "Surtax" and in line 4 "Income Tax"? Is it a misprint? Perhaps the Financial Secretary to the Treasury would also tell me this: This Clause seems to aim at protecting a man's executor against having to pay in the case of a rise in the rate after the estate has been wound up. That would be all right, but what happens if the rate ultimately is reduced after the tax has been paid? Does the executor get any money back then, or suppose the unsettled probate account drags on till after the tax has been reduced?


Your decision, Mr. Dunnico, is the last thing that I should question in any possible way. You have decided to call no Amendments on this Clause, and the only reason I regret it is that I have reason to think that as printed the Clause is in error and that what the Government really intended to do by this Clause was to provide that the amount of Surtax payable in respect of the total income of an individual for the year of assessment in which he dies shall not exceed the amount of Surtax which would have been payable if the Surtax had been chargeable for that year at the same rate as for the year preceding. It seems to be very strange that in this Clause, which provides for a limitation on the amount of Surtax payable, the Government should say the Surtax payer shall not be asked for a greater amount than if the Income Tax chargeable in the preceding year had not been raised.

We are told that Income Tax in the future will cover a multitude of sins. It is to cover Surtax, or Super-tax, or any form of direct tax which has been or is going to be imposed, but in this case you have a Clause which appears to be an exception to the general principle laid down by the right hon. Member for West Woolwich (Sir K. Wood), when he said just now that he very much doubted whether throughout this Bill there was a single Clause that was really designed for the benefit of the taxpayer. This Clause certainly ostensibly appears to be so designed. It says that in the event of the taxpayer dying, his estate shall not be charged at a higher rate of Surtax than the tax of which he was cognisant when he still walked this earth. I have come to the conclusion that there is one thing the Chancellor of the Exchequer is afraid of, and that is raising ghosts. He does not want, when he increases the Surtax for any year, to increase the Surtax in respect of the property of somebody who is already defunct, because that might raise obvious difficulties on those rare occasions when he is able to stay in bed. It is very curious that if the Chancellor raises the Surtax after the taxpayer is dead, his elate apparently is to be responsible for Surtax at the increased rate, but the Clause says that if he raises the Income Tax after the taxpayer is dead, his executor is to pay Surtax only at the rate which was in force before he died.

There is a further difficulty. It appears to me that this Clause 21 would not arise except for the provisions of Clause 7, which deals with the rate at which Surtax in future shall be payable. There is special exception made in Clause 21 that if the Surtax payer dies the provisions of Clause 7 shall not operate. Why, in order to simplify the Finance Bill, did the right hon. Gentleman not put the subject matter of Clause 21 in as a proviso to Clause 7, so that people would know where to look for it? Surely if a man was able through his executors to thank the Government for this little bit of relief to his estate, it would be a convenience to be able to know where to look for this relief. They would look for it in Clause 7, but they have to look through 14 other Clauses, which have nothing whatever to do with the subject, in order to find the little bit of sugar. I suggest that it is in the wrong place, that it ought not to be a separate Clause, that it ought to be a proviso of Clause 7, that it is wrongly drafted and that it ought to say that the Surtax payable on the income of a single individual for the year of assessment in which he dies shall not exceed the amount of the Surtax that would have been payable if the Surtax had been chargeable for that year at the same rate as the proceeding year. Surtax must relate to Surtax. It is idle to tell me that Income Tax covers Surtax. The fashion to increase direct taxation is through Surtax. While we have the present Government in power we shall have a succession of Finance Bills, like the present Finance Bill, tending to limit more and more to the selected few the privilege of paying practically the whole of the taxation of the country. It is through the agency of the Surtax that we shall find that the Chancellor of the Exchequer, if he is in office next year, which may the Lord forbid, will raise the surplus revenue that he requires.


We can not discuss the merits or demerits of Surtax on this Clause. This Clause provides the machinery by which the Surtax payable shall be determined in specific cases.


I bow to your Ruling. I am only pointing out that it is probably through Surtax and not through Income Tax that increased taxation will be raised, and therefore it is very important that if a concession of this kind in respect of a deceased taxpayer is to be made, it should be made upon the right basis, and that his estate should not be called upon to pay Surtax at a higher rate that was in force at the time when he was alive in the year preceding his decease. That does not apply to Income Tax. It was for that reason that I put down my Amendment. Will the Financial Secretary to the Treasury tell us why Surtax for any year in respect of tax due from a deceased taxpayer should be at the rate of Income Tax for the preceding year, and not upon the Surtax of the preceding year?


I think that I can dispose of the argument of the hon. Member for Farnham (Mr. A. M. Samuel) and the hon. Member for Barnstaple (Sir B. Peto) in a few words. Before the right hon. Member for Epping (Mr. Churchill) altered the Income Tax and instituted Sur-tax, the arguments of the two hon. Members would have been sound, but when that alteration was made, the Sur-tax became a thing not apart from but a part of the Income Tax, in other words, Income Tax, as explained in that Act, includes Income Tax, at the standard rate, and what is now known as Sur-tax. Therefore, the words "Income Tax" correctly covers Sur-tax.

10.0 p.m.


On the matter of wording, will the Financial Secretary explain what would happen if the rate of Sur-tax is raised next year, as is likely to be the case if the present Government remain in office, and the rate of Income Tax is left alone? On that wording, does Sur-tax cover Income Tax, or does it merge into Income Tax?


The hon. Baronet had better let me explain the Clause and then he will understand the point. Income Tax covers Sur-tax, but Sur-tax does not cover Income Tax. Why are these two taxes dealt with separately? Income Tax at the standard rate is assessed for the year in which it arises, and when a person dies there is no hardship in his estate paying Income Tax for that year at the standard rate passed in the Finance Bill. In regard to Surtax, there is a difficulty, because Sur-tax relating to the year 1929–30 is not actually paid until January, 1931. In these circumstances, and particularly in view of Clause 7, a difficulty would arise in regard to a payment by executors in respect of the property of a deceased person's estate if they did not know until a considerable time afterwards what total amount they had to pay. It is quite reasonable that in regard to a living taxpayer he should pay on the 1st January, 1931, at the rate imposed in the Budget of the preceding year, but where the taxpayer dies before the new Budget is introduced, it would be unreasonable that his executors should have to pay an additional rate. Therefore, this Clause is a concession. The hon. Member for Farnham asked whether the estate of the deceased taxpayer had the best of it either way. It has. Under this Clause, if the new Finance Bill reduces the rate of Sur-tax, the estate gets the benefit of the reduction, but if it puts up the rate of Sur-tax the taxpayer does not have to bear the increased amount. After this explanation, I hope that all the hon. Members who are fighting in the interests of the taxpayers will be satisfied.


I accept the explanation of the Financial Secretary, but it would satisfy some of us if he would explain under what Section of the previous Finance Act it is defined that Income Tax includes Sur-tax.


Speaking from memory, I think it was in the Finance Act of 1927 that the change over was made from Income Tax to Sur-tax. I understand that it was in Section 38 of that Act that the Income Tax was divided into two parts—Income Tax at the standard rate and an additional amount payable by people with incomes of over £2,000.


Will the Financial Secretary explain to me this Surtax only becomes payable more than a year after it is imposed, and in another Clause of this Bill provision is made in case in a subsequent Budget the Surtax is increased. It is quite true, as the Financial Secretary said, that Section 21 was apparently put in for the purpose of meeting the extreme difficulty if a man dies after 5th April, 1930, and becomes liable for the whole year's Surtax, and it is not payable till the 1st January, 1932. As the earlier Clause stands, the estate of that man would remain incapable of being wound up till some time shortly before January, 1932, when a new Budget had come in and a new rate of tax been fixed. I question the accuracy of the Financial Secretary's statement that this Clause gives benefit if there is a reduction in the same way as if there is an increase.


The Clause does not give the benefit of a reduction, but it does not take it away. If it was not for this Clause, the estate would pay more if the tax was increased. It does not take away the advantage to the estate if the tax is reduced. In that case it is quite true that there would be a little more money coming in, but I do not think any executors would be very worried if there was a little more money than had been expected. "Shall not exceed," it says.


If the executors keep an estate unadministered for a year and a-half and the tax is reduced, it might be that it gets the benefit, but it is at the expense of keeping the estate tied up for the year and a-half, which is out of all proportion, and I say again that this does not give any benefit in that instance.