HC Deb 24 June 1935 vol 303 cc823-5

Whereas under Section forty-two of the Finance Act, 1927, Sur-tax is due and payable as a deferred instalment of Income Tax, it shall be provided that where a person assessed to Sur-tax dies (or ceases to be liable to Sur-tax) during the year following the year of assessment, the amount of Surtax payable in respect of the year preceding his death or cessation from liability shall be restricteed to the proportion of the year during which the person dying or ceasing to be liable was subject to taxation.—(Mr. D. G. Somerville.)

Brought up, and read the First time.

3.40 p.m.


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

This new Clause is no new one to the Committee and was first moved in 1928. It was then defeated, although many Members voted for it. Negotiations with the Chancellor of the Exchequer followed, but he could not see his way to give way. The short and simple Section 6 of the Finance Act, 1912, reads as follows: In the case of the death of a person liable to Super-tax during any year for which Super-tax is charged, a part only of the year's Super-tax shall be payable proportionate to the part of the year which has elapsed before the date of the death. This section was repealed owing to the Sur-tax Sections in the 1928 Finance Act, which thereby created a liability on the estate of a Sur-tax payer who died after 5th April, 1929. This meant that when every existing Sur-tax payer was dead an additional £60,000,000 at least would have been collected from their estates. In other words, the limited liability of 1912 was removed by the Finance Act of 1928, and it really amounted to an additional form of Estate Duty. This creates considerable hardship on Sur-tax payers, particularly those who have little or no capital. They may have a large income, but may not have sufficient capital to enable the estate to meet this additional tax. I will give an example which emphasises the point. A taxpayer receiving a salary of £5,000 a year dies on, say, 6th October, 1934. On the 1st January, 1935, his estate has to find £231 5s. for the payment of Sur-tax for the year 1933–34. In addition, there will also have to be paid Sur-tax for the period 6th April to 6th October, 1934. Under the Section of the Finance Act of 1912, which I have quoted, if he had died on 6th October, 1928, before the alteration of the law of which I complain, his Super-tax liability would only have been for the proportion of the financial year 1927 during which he had lived, namely, £115 12s. I suggest to the Chancellor that he might carefully consider this case and see if some relief can be given.

3.44 p.m.


The new Clause is not so simple as it may have sounded to those who listened to my hon. Friend's exposition of it. He seemed to be asking that a man should only pay Surtax on his income for a period of the year in which he lived. That is not what this proposed Clause means at all. Surtax is paid for the year previous to the year for which Income Tax is paid. In the year in which a man pays his Income Tax for 1935 he is paying his Surtax for 1934. The effect of the new Clause would be that a man who dies in the middle of 1935 would be let off half his Surtax for the year 1934, which is a claim he has no right to make. I would remind the Committee that in the first year in which a man becomes liable for Surtax he pays no Surtax at all. He does not pay until the following year. If he became liable to Surtax in 1931 he does not pay it until 1932. The taxpayer, therefore, who is liable to Surtax and who dies in October, 1935, has no claim to be exempted for half the previous year's Surtax. His estate will not only have to pay the Surtax for the six months of the year previous to his death, but Surtax for the year before that, when he was enjoying his additional income.

3.46 p.m.


I am glad to hear the Financial Secretary's speech, because after listening to the speech of the hon. Gentleman who moved the new Clause, I was under the impression that some injustice had been done to the estate of a deceased person. It appears, however, that all that is being asked from the estate is what the taxpayer would have been liable to pay had he lived. That is only fair, and I am surprised that such a proposal should have been put forward.

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