HC Deb 12 June 1934 vol 290 cc1653-6

There shall cease to be an appeal to the Board of Referees from any determination of the Special Commissioners given on or after the date of this Act pursuant to paragraph 1 of the First Schedule to the Finance Act, 1922, and save in respect of such determinations given before the date of this Act paragraph 2 of the said First Schedule is hereby repealed.—[Mr. Croom-Johnson.]

Brought up, and read the First time.

9.51 p.m.


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

This Clause seeks to do away with one of the many rights of appeal which exist under the Finance Act, 1922, and is one of the very few Clauses proposed in these discussions which have not aimed at a reduction of a duty, but is merely aimed at an improvement in procedure. It was found after the War, when taxation was high, that the national inclination of the people was so to order their affairs that they did not attract undue taxation, and that a number of people turned themselves into one-man companies, did not declare any dividends, drew on the money by borrowing from the company, and by that means succeeded in avoiding the duty of paying Super-tax, as it was then called. The Finance Act of 1922 accordingly provided that some steps should be taken by which that method of evasion might be stopped, so to speak, at the source, and the method adopted was that the Board of Referees, which had been called into existence during the War for another purpose altogether, might give a direction that a company ought to have distributed a reasonable proportion of its earnings. I am putting it very briefly in order to save time.

From that direction there is a right of appeal to the Special Commissioners, a body set up under the Income Tax Acts, who have discharged their duties admirably and who have the respect and confidence of all classes of taxpayers, I think, who come before them. But the legislation goes on to provide, somewhat illogically, that when you get from the direction of the Board of Referees to the Special Commissioners, you may go back again from the Special Commissioners to the Board of Referees; and it does not stop there. No doubt, at the time, it was thought a necessary protection for the one-man company. Nobody desires,. I suppose, to give them undue protection, but at all events the situation does not stop there, because, having got back to the Board of Referees, there is a special provision in the Act of 1922 by which you may get the Board of Referees to state a case for the opinion of the High Court, and you may go from the High-Court Judge to the Court of Appeal, and from the Court of Appeal to the House of Lords. Therefore, we get a succession of appeals, and this new Clause is aimed at cutting out the appeal back again to the Board of Referees, the effect of which would be that there would be in this matter as in any other Income Tax and Surtax matter, an appeal to the High Court, by way of case stated, from the decision of the Special Commissioners.

I asked a question a little time ago, and got an answer from my hon. Friend the Financial Secretary to the Treasury on 2nd May last, which tells us how many of these appeals there are and what necessity there is for this multiplicity of appeals. In the five financial years ended this year the total number of appeals to the Special Commissioners from directions given by the Board of Referees was 304. So well did that body do its work that the total number of appeals from them back to the Board of Referees in the same period was only 32. That is to say, about 10 per cent. Of those appeals the directions by the Special Commissioners were confirmed in whole or in part in 23 out of 32 cases. So that in only nine cases were the appeals wholly successful.

The Committee is probably aware that in connection with the subject of appeals in the law courts generally there has been sitting and has reported a committee under the presidency of the Master of the Rolls, Lord Hanworth, and there is a general consensus of opinion in the commercial world, in the legal world and in the world of litigants, if they are not comprised in one or other of those bodies, that it is very desirable there should not be an unlimited number of appeals, dragging litigants or the Government, as the case may be, from pillar to post, so that years elapse before you get a final decision. Here we find that we get the right of appeal from the directions of the Board of Referees to the Special Commissioners, back to the Board of Referees and then to three different tribunals in the High Court. Speaking as a practising member of the legal profession which must, I suppose, have derived some benefit from this state of affairs, I cannot think that such a state of affairs is for the benefit ultimately of any branch of the community whether they be taxpayers, tax gatherers, members of the legal profession or others interested in this litigation. That being so, while I have no doubt that there may have been some good reason in times past for this multiplicity of appeals, I suggest that the matter is well worth consideration at a time when a good many of us are engaged in overhauling our legal procedure in order to see whether in 1934 it is capable of improvement.

I would desire to add only one further observation upon this point. There has been sitting for some time a committee under the presidency of Lord Macmillan, one of the Lords of Appeal, whose name is well known to most of us, for the purpose of considering whether there should be any amendments and a possible codification of the laws relating to Income Tax. I hope that as a result of this question being raised in the Committee it may be possible, if the Chancellor of the Exchequer or the Financial Secretary is not able this evening to give effect to this modest proposal of legal reform, that the question will be submitted to that committee, so that the matter of appeal after appeal may be brought before the attention of a committee of experts. Judging from the figures that I have given, if this right of appeal, this extra and unnecessary right of appeal, is cut out, the effect may be not merely that the taxpayers or those who are seeking to evade tax may be saved some legal costs but that the Government may be saved both time in the collection of the tax and expenditure in the getting of a final legal decision on the point.

10 p.m.


This is a proposal for the abolition of the right of appeal to the Board of Referees, under Section 21 of the Finance Act, 1922. The Board of Referees is composed of men of wide business experience, presided over by an eminent lawyer and there is no reason whatever to suppose that the taxpayers concerned would welcome the abolition of the right of appeal to the Board of Referees. Certainly no evidence has been brought before us to show that that is the case. My hon. and learned Friend seems to entertain the notion that the procedure is somewhat complicated. He has told the Committee that many parts of the Income Tax procedure are now under review, although he did not particularise what improvement he desired. I can assure him that as the majority of the appeals to the board are made on behalf of taxpayers, there is no indication at present that his proposal would meet with the approval of the taxpayers, and I am not in a position to accept the Clause this evening.

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