HC Deb 12 June 1934 vol 290 cc1569-76

The rules applicable to Schedule E set forth in the First Schedule to the Income Tax Act, 1918, shall be amended as follows:— In paragraph (1) of Rule 11, the word 'the,' after the words 'deducted out of,' and the word 'that,' after the words 'on account of,' shall be deleted.

In Rule 15 the words 'any sums, the deduction shall be made at such times in each year as the said sums are payable' shall be deleted, and the following words shall be substituted: 'official pay, the deductions for any Income Tax year ending the fifth day of April shall be made at such times as the official pay is payable during the year ending the thirtieth day of June following:

Provided that, as respects the tax for the current Income Tax year, the deductions for the Income Tax year ending the fifth day of April, nineteen hundred and thirty-five, shall be made at such times as the official pay is payable during the periods beginning the first day of April, nineteen hundred and thirty-four, to the 'thirtieth day of June, nineteen hundred and thirty-five. Provided that the foregoing Amendments shall not apply—

  1. (a) in the case of leave salary chargeable under Schedule E falling within Section seventeen of the Finance Act, 1923; or
  2. (b) in the case of any office or employment held or exercised occasionally or intermittently in the United Kingdom by a person who is not continuously resident there.—[Mr. Wilmot.]

Brought up and read the First time.

4.56 p.m.


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

I should like to explain that the Rules referred to are the Rules governing the payment of Income Tax by civil servants. The intention of the Clause is to do something to remedy a grievance which civil servants feel presses somewhat hardly upon them. The effect of the proposal is in no sense to give to civil servants any advantage over other Income Tax payers. As at present framed the law places civil servants at a very distinct disadvantage as compared with non-civil servants, members of the general public, in regard to the method and the time of their Income Tax payments. Not only do civil servants, where the rate of their remuneration requires them to do so, pay Income Tax on the same basis of assessment as other taxpayers, but their payments are deducted at the source each quarter by the Department under which they are employed. That is a very considerable advantage from the point of view of the Exchequer, inasmuch as there is no delay in making payment of Income Tax by civil servants, as sometimes, unfortunately, is the case by members of the general public. It would be fair to say that the periodical deduction at the source has also the advantage from the point of view of the Exchequer in that there is no necessity to press a reluctant taxpayer, possibly through the courts. There is the advantage also in that the interest on the tax payments amount to a considerable sum in the aggregate to the Exchequer by reason of the prepayment.

But that is not the grievance to which I would refer. The grievance is that civil servants are compelled to pay their Income Tax more promptly than other people. They have to pay a considerable period before the ordinary taxpayer is required to pay. It works out in this way, that the ordinary taxpayer does not pay anything in respect of tax payable during the financial year until 1st January in the Income Tax year, which ends on the 5th April. On 1st January half the amount due for the current becomes payable, but so far as the civil servant is concerned by the 1st January he has already paid three-fourths of his tax, and he pays the other quarter on. 1st April following, having therefore completed the full 100 per cent. of his payments before the end of the financial year, that is to say, before the 5th April. The ordinary taxpayer having become liable for 50 per cent. of his tax on 1st January does not become liable for the further 50 per cent. until 1st July. That is to say, his 100 per cent. tax does not become due until a considerable time after the close of the financial year. For a short period after 1931 the Chancellor of the Exchequer obtained approval for the payment by the ordinary taxpayers of 75 per cent. of their contributions within the financial year, instead of the normal 50 per cent., but in the 1933 Budget the Chancellor of the Exchequer provided for a reversion to the present normal system under which the ordinary taxpayer pays only 50 per cent. during the financial year. This undoubtedly gave relief to the ordinary taxpayer in that it deferred his payment of one-quarter of his Income Tax for that period; and the effect of the Clause is to provide that in the case of a civil servant there shall for this year, and for this year only, be a deferment of one-quarter of the tax payable, in order to do something to bring him into line with the ordinary tax- payer. This will place the civil servant and the ordinary taxpayer on an equality in regard to the difference of a quarter's tax. But it still leaves the civil servant under the strictest possible obligation, by deduction of the tax at the source, to pay three-quarters of his tax during the relevant financial year, while the ordinary taxpayer will still pay only the 50 per cent. So the effect will be that the civil servant will still be worse off. But I am pressing only that 25 per cent. of the difference, on the lines which I have indicated, should be adjusted.

I want to make it quite clear that in regard both to the ordinary taxpayer and the civil servant over a period of years there is, of course, no difference, because both pay the full tax. To put it briefly, the effect of the new Clause will be to provide that while the ordinary taxpayer will pay 50 per cent. of last year's and 50 per cent. of the current year's tax, the civil servant will in future pay 25 per cent. of last year's and 75 per cent. of this year's tax. It is somewhat technical and difficult to explain without pencil and paper, but I think the Committee will appreciate that the present system is a real hardship on the civil servant, and a hardship for which there is no justification. We are not asking for any change in the method of payment in advance, by deduction at the source, but we are asking that payment shall be deferred for one quarter in order that civil servants may not be so much in advance of the ordinary taxpayer as they now are.

5.4 p.m.


I must say that I admired the ingenuity of the hon. Member for East Fulham (Mr. Wilmot) in manufacturing a grievance on behalf of civil servants out of the fact that it has been possible to restore the system which obtained before 1931, under which, the taxpayer whom the hon. Member called the ordinary taxpayer pays his Income Tax in two equal instalments, instead of in one instalment of three quarters and the other of one quarter. But the hon. Member can only establish what I must call an imaginary grievance by assuming that the business employé in ordinary business is the ordinary taxpayer. Even if he does label him the ordinary taxpayer, he cannot say that that is the ordinary method of collecting Income Tax, because in fact Income Tax is deducted throughout the year at the source from payment of interest on Government securities, home and foreign, from dividends paid by public companies, and from interest on loans, and ground rents. Income Tax on property under Schedule A is payable not in two sums but in one sum on 1st January. Public companies pay the full year's tax on 1st January. In 1869 the ordinary taxpayer——


I referred to the comparable taxpayer, the similar man.


I will come to the comparable taxpayer. The man whom the hon. Gentleman calls the ordinary taxpayer in 1869 had to pay (his tax in one sum on 1st January. It was not found possible to continue that system when Income Tax was raised to such great heights as it afterwards was, because the ordinary man, the business employé, was not in a position to find the large lump sum that was required. Accordingly, in 1915 Mr. McKenna introduced the method of payment by two equal instalments. Although I admit that the civil servant does in effect, on the average, pay his Income Tax at an earlier period in the year than the business employé, I do not accept the view that the civil servant is in every way comparable, or so comparable with the business employé

ployé that he must in every respect be treated in the same way. The fact is that the standard method of payment of tax is by a direct payment on 1st January, or by a deduction throughout the whole course of the year as the income comes in. The exception is the case of the business employé who pays in two equal instalments.

Compare the position of the civil servant with the outside employé, and it is obvious that the civil servant has very considerable advantages. He has not only a much greater security of tenure, but he gets his income with certainty and regularity, which makes it no hardship at all to have the tax deduction made from the quarterly payments. Indeed, on the whole I should think it is rather a convenience for him to have his tax deducted in this way than to have to set aside from time to time a sum to make up the larger payment which he would have to make with only two payments in the year. Therefore, while I admire the hon. Member's ingenuity, I cannot admit that there is any real grievance here, or any hardship that requires redress.

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

The Committee divided: Ayes, 59; Noes, 277.

Division No. 280.] AYES. [5.9 p.m.
Acland, Rt. Hon. Sir Francis Dyke Griffith, F. Kingsley (Middlesbro', W.) Rea, Walter Russell
Attlee, Clement Richard Griffiths, George A. (Yorks, W. Riding) Roberts, Aled (Wrexham)
Banfield, John William Grithffis, T. (Monmouth, Pontypool) Rothschild, James A. de
Batey, Joseph Grunay, Thomas W. Salter, Dr. Alfred
Brown, C. W. E. (Notts., Mansfield) Hamilton, Sir R. W. (Orkney & Zetl'nd) Sinclair, Maj. Rt. Hn. Sir A. (C'thness)
Cape, Thomas Harris, Sir Percy Smith, Tom (Normanton)
Cocks, Frederick Seymour Hicks, Ernest George Thorne, William James
Cove, William G. Holdsworth, Herbert Tinker, John Joseph
Cripps, Sir Stafford Janner, Barnett Wayland, Sir William A.
Curry, A. C. Jenkins, Sir William West, F. R.
Daggar, George John, William White, Henry Graham
Davies, David L. (Pontypridd) Jones, Henry Haydn (Merioneth) Williams, David (Swansea, East)
Davies, Rhys John (Westhoughton) Jones, J. J. (West Ham, Silvertown) Williams, Dr. John H. (Lianelly)
Dobbie, William Jones, Morgan (Caerphilly) Williams, Thomas (York, Don Valley)
Edwards, Charles Lawson, John James Wilmot, John
Evans, R. T. (Carmarthen) Leonard, William Wood, Sir Murdoch McKenzie (Banff)
Foot, Isaac (Cornwall, Bodmin) Lunn, William Young, Ernest J. (Middiesbrough, E.)
Gardner, Benjamin Walter Mainwaring, William Henry
George, Megan A. Lloyd (Anglesea) Mallalieu, Edward Lancelot TELLERS FOR THE AYES.—
Greenwood, Rt. Hon. Arthur Mason, David M. (Edinburgh, E.) Mr. Groves and Mr. G. Macdonald.
Grenfell, David Rees (Glamorgan) Pickering, Ernest H.
Acland-Troyte, Lieut.-Colonel Aske, Sir Robert William Blindell, James
Adams, Samuel Vyvyan T. (Leeds, W.) Astor, Maj. Hn. John J. (Kent, Dover) Borodale, Viscount
Agnew, Lieut.-Com. p. G. Baldwin, Rt. Hon. Stanley Bossom, A. C.
Albery, Irving James Balfour, Capt. Harold (I. of Thanet) Boulton, W. W.
Allen, Sir J. Sandeman (L'pool, W.) Barclay-Harvey, C. M. Bower, Lieut.-Com. Robert Tatton
Allen, Lt.-Col. J. Sandeman (B'k'nh'd) Barrie, Sir Charles Coupar Bowyer, Capt. Sir George E. W.
Allen, William (Stoke-on-Trent) Beaumont, M. W. (Bucks., Aylesbury) Boyce, H. Leslie
Anstruther-Gray, W. J. Benn, Sir Arthur Shirley Braithwaite, J. G. (Hillsborough)
Applin, Lieut.-Col. Reginald V. K. Bernays, Robert Broadbent, Colonel John
Brocklebank, C. E. R. Hellgers, Captain F. F. A. Procter, Major Henry Adam
Brown, Col. D. C. (N'th'l'd., Hexham) Heneage, Lieut.-Colonel Arthur P. Pybus, Sir Percy John
Brown, Brig.-Gen. H.C. (Berks., Newb'y) Hepworth, Joseph Radford, E. A.
Buchan, John Hills, Major Rt. Hon. John Waller Raikes, Henry V. A. M.
Buchan-Hepburn, P. G. T. Hore-Belisha, Leslie Ramsay, Capt. A. H. M. (Midiothian)
Burgin, Dr. Edward Leslie Hornby, Frank Ramsay, T. B. W. (Western Islet)
Burnett, John George Horsbrugh, Florence Ramsbotham, Herwald
Burton, Colonel Henry Walter Howard, Tom Forrest Ramsden, Sir Eugene
Cadogan, Hon. Edward Hudson, Capt. A. U. M. (Hackney, N.) Ray, Sir William
Campbell, Sir Edward Taswell (Brmly) Hunter, Capt. M. J. (Brig) Reed, Arthur C. (Exeter)
Campbell-Johnston, Malcolm Hurd, Sir Percy Reid, Capt. A. Cunningham.
Caporn, Arthur Cecil Hutchison, W. D. (Essex, Romf'd) Reid, David D. (County Down)
Carver, Major William H. Inskip, Rt. Hon. Sir Thomas W. H. Remer, John R.
Cautley, Sir Henry S. Iveagh, Countess of Renwick, Major Gustav A.
Cayzer, Sir Charles (Chester, City) Jackson, Sir Henry (Wandsworth, C.) Rhys, Hon. Charles Arthur U.
Cazalet, Thelma (Islington, E.) Jamleson, Douglas Rickards, George William
Chamberlain, Rt. Hon. N. (Edgbaston) Jesson, Major Thomas E. Roberts, Sir Samuel (Ecciesall)
Clarke, Frank Kerr, Lieut.-Col. Charles (Montrose) Robinson, John Roland
Clarry, Reginald George Kerr, Hamilton W. Rosbotham, Sir Thomas
Clayton, Sir Christopher Keyes, Admiral Sir Roger Ross, Ronald D.
Cobb, Sir Cyril Kimball, Lawrence Ruggles-Brise, Colonel E. A.
Cochrane, Commander Hon. A. D. Knox, Sir Alfred Runge, Norah Cecil
Colfox, Major William Philip Lamb, Sir Joseph Quinton Russell, Albert (Kirkcaldy)
Collins, Rt. Hon. Sir Godfrey Lambert, Rt. Hon. George Russell, Alexander West (Tynemouth)
Colville, Lieut.-Colonel J. Latham, Sir Herbert Paul Russell, Hamer Field (Sheffield, B'tside)
Conant, R. J. E. Law, Sir Alfred Russell, R. J. (Eddisbury)
Cook, Thomas A. Law, Richard K. (Hull, S. W.) Rutherford, John (Edmonton)
Cooper, A. Duff Lees-Jones, John Salmon, Sir Isidore
Copeland, Ida Lennox-Boyd, A. T. Salt, Edward W.
Courthope, Colonel Sir George L. Levy, Thomas Samuel, Sir Arthur Michael (F'nham)
Cranborne, Viscount Liddall, Walter S. Sandeman, Sir A. N. Stewart
Crooke, J. Smedley Locker-Lampson, Rt. Hn. G. (Wd. G'n) Savery, Samuel Servington
Crookshank, Col. C. de Windt (Bootle) Lockwood, Capt. J. H. (Shipley) Scone, Lord
Crookshank, Capt. H. C. (Galnsb'ro) Loder, Captain J. de Vere Shakespeare, Geoffrey H.
Dalkeith, Earl of Loftus, Pierce C. Shaw, Helen B. (Lanark, Bothwell)
Davies, Maj. Geo. F. (Somerset, Yeovil) Lovat-Fraser, James Alexander Simmonds, Oliver Edwin
Davison, Sir William Henry Lumley, Captain Lawrence R. Skelton, Archibald Noel
Denvllie, Alfred Lyons, Abraham Montagu Smiles, Lieut.-Col. Sir Walter D.
Despencer-Robertson, Major J. A. F. Mabane, William Smith, Louis W. (Sheffield, Hallam)
Dickie, John P. MacAndrew, Lieut.-Col. C. G. (Partick) Smith, Sir Robert (Ab'd'n & K'dine, C.)
Dixon, Rt. Hon. Herbert MacAndrew, Capt. J. O. (Ayr) Smithers, Sir Waldron
Dower, Captain A. V. G. MacDonald, Malcolm (Bassetlaw) Somerset, Thomas
Drewe, Cedric Macdonald, Capt. P. D. (I. of W.) Somerville, Annesley A. (Windsor)
Drummond-Wolff, H. M. C. McKie, John Hamilton Soper, Richard
Duckworth, George A. V. Maclay, Hon. Joseph Paton Spencer, Captain Richard A.
Duncan, James A. L. (Kensington, N.) McLean, Major Sir Alan Spender-Clay, Rt. Hon. Herbert H.
Dunglass, Lord Maclean, Nell (Glasgow, Govan) Spens, William Patrick
Eady, George H. McLean, Dr. W. H. (Tradeston) Stanley, Rt. Hon. Lord (Fyide)
Edmondson, Major Sir James Maitland, Adam Stanley, Hon. O. F. G. (Westmorland)
Elliot, Rt. Hon. Walter Makins, Brigadier-General Ernest Stewart, J. H. (Fife, E.)
Elliston, Captain George Sampson Manningham- Buller, Lt.-Col. Sir M. Stones, James
Elmley, Viscount Margesson, Capt. Rt. Hon. H. D. R. Storey, Samuel
Emmott, Charles E. G. C. Marsden, Commander Arthur Strauss, Edward A.
Emrys-Evans, P. V. Martin, Thomas B. Stuart, Lord C. Crichton.
Erskine-Bolst, Capt. C. C. (Blackpool) Mason, Col. Glyn K. (Croydon, N.) Sueter, Rear-Admiral Sir Murray F.
Evans, Capt. Arthur (Cardiff, S.) Meller, Sir Richard James Sugden, Sir Wilfrid Hart
Everard, W. Lindsay Mills, Major J. D. (New Forest) Summersby, Charles H.
Fermoy, Lord Mitchell, Sir W. Lane (Streatham) Templeton, William P.
Fox, Sir Gifford Monsell, Rt. Hon. Sir B. Eyres Thompson, Sir Luke
Fremantle, Sir Francis Moreing, Adrian C. Thomson, Sir Frederick Charles
Galbraith, James Francis Wallace Morris, Owen Temple (Cardiff, E.) Thorp, Linton Theodore
Ganzonl, Sir John Morris-Jones, Dr. J. H. (Denbigh) Titchfield, Major the Marquess of
Gillett, Sir George Masterman Morrison, G. A. (Scottish Univer'ties) Todd, Lt.-Col. A. J. K. (B'wick-on-T.)
Gilmour, Lt.-Col. Rt. Hon. Sir John Morrison, William Shephard Touche, Gordon Cosmo
Gluckstein, Louis Haile Munro, Patrick Train, John
Goff, Sir Park Nail-Cain, Hon. Ronald Tryon, Rt. Hon. George Clement
Goodman, Colonel Albert W. Nation, Brigadier-General J. J. H. Turton, Robert Hugh
Gower, Sir Robert Nicholson, Godfrey (Morpeth) Ward, Lt.-Col. Sir A. L. (Hull)
Graham, Sir F. Fergus (C'mb'rl'd, N.) Nicholson, Rt. Hn. W. G. (Petersf'ld) Ward, Sarah Adelaide (Cannock)
Granville, Edgar Normand, Rt. Hon. Wilfrid Wardlaw-Milne, Sir John S.
Grattan-Doyle, Sir Nicholas Oman, Sir Charles William C. Warrender, Sir Victor A. G.
Graves, Marjorle Patrick, Colin M. Watt, Captain George Steven H.
Grimston, R. V. Peake, Captain Osbert Wedderburn, Henry James Scrymgeour.
Gritten, W. G. Howard Pearson, William G. Weymouth, Viscount
Gunston, Captain D. W. Peat, Charles U. Whyte, Jardine Bell
Guy, J. C. Morrison Percy, Lord Eustace Willoughby de Eresby, Lord
Hacking, Rt. Hon. Douglas H. Perkins, Walter R. D. Wills, Wilfrid D.
Hales, Harold K. Petherick, M. Windsor-Cilve, Lieut.-Colonel George
Hanbury, Cecil Peto, Sir Basil E. (Devon, Barnstaple) Winterton, Rt. Hon. Earl
Hanley, Dennis A. Pike, Cecil F. Wise, Alfred R.
Hartington, Marquess of Potter, John Womersley, Sir Walter
Hartland, George A. Powell, Lieut.-Col. Evelyn G. H. TELLERS FOR THE NOES.—
Haslam, Sir John (Bolton) Power, Sir Joh'n Cecil Sir George Penny and Commander
Headlam, Lieut.-Col. Cuthbert M. Pownall, Sir Assheton Southby.