HC Deb 19 June 1933 vol 279 cc519-22

(1) The provisions of this section shall have effect in relation to sur-tax due from any person (in this section referred to as the "beneficiary") to whom, or for whose benefit any income or any capital may in the discretion of some other person be paid or applied under a trust.

(2) If any sur-tax charged in respect of the income of the beneficiary is not paid before the expiration of six months from the date when it became due and payable, the Special Commissioners may at any time thereafter, so long as the said sur-tax remains unpaid, cause to be served on the trustees of the trust a notice in writing that the said surtax remains unpaid.

(3) Where such a notice as aforesaid is served in accordance with the provisions of this section on the trustees of the trust it shall be the duty of the trustees, as soon as may be, and, if necessary from time to time, to pay the Commissioners of Inland Revenue in or towards satisfaction of the said surtax from time to time remaining unpaid any income or capital which, by virtue of any exercise of the discretion under the trust, the beneficiary may become entitled to receive or to have applied for his benefit.

(4) Any payments made out of income by trustees on account of sur-tax in respect of which a notice under this section has been served shall be deemed for all the purposes of the Income Tax Acts to represent income paid to the beneficiary.

(5) Any sum which the trustees are liable to pay by virtue of the provisions of this section shall be recoverable from them as a debt due to the Crown.

(6) Service of any notice under this section may be effected by sending it by post to the person on whom it is to be served by letter addressed to him at his usual or last known place of abode, and, where there are two or more trustees under the trust, the notice shall be deemed to have been validly served upon the trustees if served upon any one of them, but nothing in this section shall render a trustee personally liable for anything done by him in good faith and in ignorance of the fact that such a notice has been served.—[Sir G. Hurst.]

Brought up, and read the First time.

5.18 p.m.

Sir GERALD HURST

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

This proposed new Clause raises the question of the beneficiary in whose case a discretionary trust has been exercised by trustees and who has no other considerable source of income than the income he derives from the discretionary trust, but who spends the whole of his income under that trust without making any provision for the payment of Surtax by himself. As the law stands at present, the Crown has no effective remedy for recovering Surtax from a beneficiary in those circumstances. The Crown cannot take judgment for a judgment would be fruitless if the beneficiary enjoys no other source of income. Nor has the Crown any remedy against the trustees, because they themselves are not liable for Surtax and they have no power to intercept income payable to a beneficiary in order to meet Surtax. An example of the abuse to which the existing state of the law gives rise came before the courts in April last year in the case of Sir Thomas Beecham. This gentleman enjoys a generous income of £18,000 a year, but, being a prodigal without principle, he allowed arrears of Surtax to accumulate to the extent of £71,000. A case of that sort is obviously against public policy. It is against public policy that a rich man who has no sense of public obligations should be utterly immune from Surtax while the great mass of his fellow citizens have to pay their share of the common burden.

I therefore raised this question on the Finance Bill of last year. The Chancellor of the Exchequer demurred to the actual form of the proposed new Clause which we suggested then, but he promised to attend to the matter in the course of the following year. The proposed Clause now on the Paper provides what I think the House will regard as fair and sufficient machinery to meet this abuse and to put an end to it. No penalty is imposed on the beneficiary and the discretion of the trustees is left unimpaired. If the trustees make payments to a beneficiary and the beneficiary allows arrears of Surtax to accumulate, and if the trustees in those circumstances decide to allocate further capital or further income for the benefit of that beneficiary, then, if notice has been served upon them by the Special Commissioners under this new Clause, it will be the duty of the trustees to intercept any future payments, whether capital or income, to the beneficiary and to meet the demands of the Special Commissioners. This new machinery has been carefully devised, and I feel confident that it will be acceptable to the House. It is a useful and fair Clause which will, I am sure, be appreciated by the country.

5.20 p.m.

Major MILLS

I beg to Second the Motion.

This proposed new Clause is a revised Version of a new Clause with a similar object which my hon. and learned Friend moved a year ago, but which the Chancellor of the Exchequer was not able to accept as drafted. It is designed to make it the duty of trustees—not in an ordinary trust but in a discretionary trust—to withhold from the beneficiary money which they would otherwise decide to pay him if his Sur-tax is more than six months in arrear and if they have been served with a notice that this is the case. It is not right that a rich man should be able to escape payment of Surtax in this way. Ordinary taxpayers meet their obligations honestly and honourably and with great difficulty, and this is a leakage that ought to be stopped. I therefore hope that my hon. Friend the Financial Secretary will be able to accept the new Clause over which he has had a year to think.

Mr. DAVID MASON

I hope that the Financial Secretary will accept this new Clause which seems to me to be a very fair proposal.

5.22 p.m.

Mr. HORE-BELISHA

I gathered from the cheers that greeted several of the remarks made by my two hon. Friends that this proposed Clause meets with the approval of the House. It is, as my hon. and learned Friend said, designed to meet the ease of an improvident person who is a beneficiary under a discretionary trust and who spends all the money and fails to pay his Surtax. This new Clause will enable the Inland Revenue to recover that tax. It is an admirably drawn Clause. It is true, as the hon. and learned Gentleman said, that my right hon. Friend promised to consider the matter last year when a similar new Clause was not so well drafted. He has had a year in which to consider it, and it now meets with his approval. I am therefore authorised to thank my hon. Friends for having drawn public attention to this matter and for having made possible a change in the law which is so desirable.

5.23.p.m.

Mr. BOOTHBY

I entirely approve of this proposed Clause, and we are grateful to the Government for accepting it. It is a necessary and overdue provision. One gentleman, Sir Thomas Beecham, has been named, though not in a particularly hostile sense, by the hon. and learned Member who moved the Clause. He said that he was a man who was lacking in public spirit and I think that it would not be well for it to go out to the country that this House was of that opinion and that it singled out one British subject for special attention. Sir Thomas Beecham may not have been very provident in regard to taxation affairs, but his record shows that he is not entirely without public spirit.

5.24.p.m.

Mr. BRACKEN

I am so moved by the eloquent words of my hon. Friend that I feel bound to join with him in what he has said. Sir Thomas Beecham may not have been very provident, but he is certainly a person who has shown great public spirit, and, had a succession of Governments fulfilled their obligations to subsidise opera, he would no doubt have been able to pay the Inland Revenue anything he is alleged to owe them.

Clause added to the Bill.