HC Deb 03 July 1939 vol 349 cc1005-9

Sub-section (1) of Section thirty-nine of the Income Tax Act, 1918, shall have effect as if there were added the following proviso: Provided that an unregistered friendly society which, not being exempt as aforesaid, proves that its income is less than three hundred and twenty pounds, shall be entitled to have the amount of Income Tax payable in respect of its income if it would but for the provisions of this Sub-section exceed a sum equal to one-half of the amount by which the income exceeds one hundred and sixty pounds, reduced to that amount."—[Mr. Cocks.]

Brought up, and read the First time.

6.58 p.m.

Mr. Cocks

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

As I have said, this deals with a very simple matter although the Clause seems complicated, a fact which, I am sure, the Chancellor of the Exchequer will regret as much as I do. There is in my constituency a little town called Eastwood which is celebrated as the birthplace of the Midland Railway Company and also of the novelist D. H. Lawrence. It is the scene of many of his novels, including "Sons and Lovers." In that town there is a small society which for 50 years has been doing a very good work among the boys up to 16 years of age and the girls of any age —the sons and lovers of the present and the future. The society in return for a small subscription makes provision for cases of sickness. It has a membership of 229 boys and 381 girls or a total of 610 young people. It has wisely invested its funds in Government securities. Three years ago its income was £158 7s. 6d. and on that income it had to pay no Income Tax. In the following year the income increased to £160 5s. 3d., and to their astonishment those in charge of the affairs of the society found that they had to pay £40 Income Tax in that year and £45 in the following year. In other words, on an income of £160 no Income Tax was payable, but when the income was only 5s. 3d. above that amount there was a charge for Income Tax of £40 —a very heavy expenditure for a small society many of whose members are quite small children. Feeling that this was an anomaly I put down this new Clause.

The effect is as follows: If the income of such a society is £160, it pays nothing at present; if it is £180, it pays £45 at present, and under my proposal it would pay £10; if it is £200, it pays £50 at present, and under my proposal it would pay £20; if it is £220, it pays £55 at present, and under my proposal it would pay £30; if it is £240, it pays £60 at present, and under my proposal it would pay £40; if it is £260, it pays £65 at present, and under my proposal it would pay £50; if it is £280, it pays £70 at present, and under my proposal it would pay £60; if it is £300, it pays £75 at present, and under my proposal it would pay £70; then when the income gets to £320 it pays £80 at present, and it would pay the same amount under my proposal. These societies, therefore, would not, under my proposal, escape paying Income Tax; in fact they would have to pay a full 10s. in the pound on any income over £160, but below that they would be exempt. It seems to me that such a sliding scale as I suggest would be fairer than the existing position. I know the Chancellor of the Exchequer always wishes to be fair to the poor and weak, and I hope he will accept the new Clause.

7.3 p.m.

Captain Crookshank

May I explain the matter by bringing to the notice of the Committee the different treatment meted out to registered and unregistered friendly societies? The new Clause deals merely with unregistered friendly societies. They are exempt from Income Tax when the income is under £160; their Income Tax exemption, that is to say, is dependent only on the size of the society's income. In the case of a registered friendly society there is a difference. They are entitled to exemption from Income Tax under Schedule A, Schedule C and Schedule D, not according to the amount of the income but according to the benefits which they give. If the gross assurance cannot exceed £300 or if the annuity is not more than £52, they get exemption from Income Tax.

I quite recognise that the proposal is intended to deal with the marginal cases. If the relief of an unregistered friendly society depends upon income, it is very unfortunate when its income is balanced just on the wrong side of the £160. To that extent, it is true, there is a hardship between one society and another, or between one year and another in the case of a particular society. In passing, may I say that I think the actual balancing point would not be £320 but slightly higher—about £355—in order to achieve the object which the hon. Member has in moving the new Clause. My right hon. Friend's difficulty is that it is impossible to say how many unregistered friendly societies there are, nor have we any idea of what the total income of the unregistered friendly societies may be—what, in short, would be the effect of a concession of this kind. It is probable that it is not a very large sum, but there is no way of ascertaining.

The hon. Gentleman suggested that the dividing line of £160 was an anomaly which had been overlooked by the Treasury. That is not so. As a matter of fact, the whole thing is an anomaly because the Royal Commission on Income Tax suggested that any exemption for unregistered friendly societies should be withdrawn, and we have left the exemption, in spite of that recommendation. So I think my answer to the hon. Gentleman must be this, that we cannot meet the case along the lines which he has suggested; if this is considered to be a hardship to unregistered friendly societies it seems to me that they have their remedy by becoming registered. Of course, I do not know on what sort of scale these boys and girls are entering the hon. Member's society, but perhaps the annuities would not be as much as £52 and it is not likely that the gross assurance would be more than —300. If that is so, by merely registering itself the society would be exempt, provided that the benefits they offer are below the figures I mentioned. As there is a possible remedy to what the hon. Member calls an anomaly, we must, as at present advised, ask the Committee not to accept this proposal.

Mr. Lees-Smith

What is the provision with regard to registered friendly societies? I understand they are exempt if the annuity is not more than £52. Suppose the annuity were £55, would a registered friendly society then be mulcted in this large sum of £30, £40 or £50 a year corresponding to the scale that my hon. Friend brought forward?

Captain Crookshank

Yes, as far as I know, subject to correction, because I am giving an answer on the spur of the moment.

7.10 p.m.

Mr. Watkins

It seems to me that the problem lies within certain definite limits. This concession can apply only to those unregistered friendly societies whose income is between £160 and £320 a year—or £355 according to the right hon. Gentleman. The Treasury must know what Income Tax it collects in those cases under the present scale, and it can readily work out what it would collect under the suggested scales, and the difference would be the money value of the concession asked for. It seems that in the relatively small number of cases to which this proposal applies the disparity as between one year and another, or between one society and another, is really so unfair that the concession ought to be made, in order to allow these very helpful societies to carry on their work.

7.11 p.m.

Mr. Lees-Smith

I do not remember this point being brought to the attention of the Committee in any previous year, and it is not a point on which we should necessarily want to go to a Division. Seeing that the point is new, would the Financial Secretary see that inquiries are made by the Treasury to ascertain the number of societies which would be affected by this proposed new Clause, and then perhaps, in answer to a question, he could give us the result of these inquiries? Because the present position is not satisfactory. There are very many quite good reasons why societies do not want to register. They are not important societies. There is a great deal of formality about registration, which is not really justified in the case of fairly simple societies of this kind. And, of course, the right hon. Gentleman has made no attempt whatever to justify the anomaly.

7.12 p.m.

Captain Crookshank

I think the right hon. Gentleman is right, and the matter has not been raised before, but there is a lot to be said for the alternative solution which I suggested that these societies should register. I must therefore not be taken as giving any pledge or promise, but I am prepared to say that we will inquire and see if we can find out what this concession would cost.

Mr. Cocks

I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.