HC Deb 12 July 1939 vol 349 cc2245-50
Mr. Greenwood

(by Private Notice) asked the Chancellor of the Exchequer whether he proposes to take any action with respect to the decision of the Special Commissioners for Income Tax that sick- ness and disablement benefit from approved and friendly societies, trade unions and other bodies are liable to Income Tax?

The Chancellor of the Exchequer (Sir John Simon)

I saw certain comments on this matter which were communicated to the Press this morning but I am informed that they are materially inaccurate. The decision referred to involves no new point of principle at all. Nor is the practice changed. Income Tax, where due in such cases, is not and will not be deducted at the source. The actual case was that a permanently disabled individual with a not inconsiderable private income which is supplemented by substantial payments derived from an insurance company and a friendly society. His total income is much above the exemption limit and the payments, which are treated by the Special Commissioners as in the nature of annuities, have continued for some years. It is not the practice to charge benefits for periods of less than a year, no recipient with an income under exemption limits can be affected and no new field of taxation is opened by the decision. I may add that benefits under the National Health Insurance Acts and Unemployment Insurance benefits are not treated as liable to Income Tax, nor will they be.

Mr. Greenwood

Will the right hon. Gentleman cause to be produced before the House, if possible to-day, the actual statement of the ruling of the Special Commissioners, because, as I understand it, the statement that appears in the Press is somewhat in conflict with the statement that he has made.

Sir J. Simon

It certainly is in complete conflict with the statement that I have made. What has been communicated to the Press suggests that some general ruling has been laid down which applies to trade unions and other things. Nothing of the sort has been done. It is a decision about an individual case affecting a gentleman of not inconsiderable income, and there is no ground whatever for saying that any new principle is involved.

Mr. Greenwood

Would it not be true to say now that the ruling and the decision in the case of this particular individual will govern the cases of a very large number of other people with not such substantial incomes, who may suffer and will suffer in the future from hardship because, as I understand the ruling, any income that they get from approved societies or trade unions, as the case may be, will be assessable for Income Tax purposes?

Sir J. Simon

There has been no general ruling either in regard to income from trade unions or any of the other bodies mentioned. This was a particular case which was decided by the Special Commissioners as a particular case. It is quite certain that it does not involve any new principle at all, but it has led to a misapprehension which I regret should have been created by the communication to the Press.

Mr. Greenwood

The right hon. Gentleman will recognise that this question does not apply to taxation at the source. Is it not the case that this particular ruling creates a precedent under which large numbers of individuals may in future suffer hardship?

Sir J. Simon

I really think not. I understand that the Commissioners merely confirmed the assessments. Each case is decided on the facts of the case. The position is exactly the same as in 1925 or any later year, and it is a complete confusion to suppose that some new principle is involved.

Mr. Rhys Davies

The right hon. Gentleman has admitted in his statement that disablement benefit paid by benefit societies will come in for Income Tax purposes. Does he not see that such disablement benefit is simply in the nature of a return of contributions paid for the benefit?

Sir J. Simon

I am afraid that the hon. Member has not followed my statement. I have not made any such admission. In the present case the taxpayer was a person drawing a supplement to his income and had done so for years, not in consequence of National Insurance or any similar Act, but as the result of a private contract with an insurance company, and with, I think, a friendly society, and on the facts of that case the Commissioners thought that what he was receiving was an annuity. He had received it for years. This has no application to the ordinary case of receiving temporary benefits from Grade unions or friendly societies.

Mr. Buchanan

In view of the fact that the decision has created some apprehension among trade unions who pay superannuation benefit, and have done for some years, will the right hon. Gentleman make available in full the decision arrived at in order that we may examine it and see its implications?

Sir J. Simon

I have done my best to make the position clear, and I shall have an opportunity of getting more information. I am quite certain that those who have informed me are accurate about this case. I do not think it is usual to publish the details of an individual case, and it is for that reason that I have not given the actual figures of income.

Mr. Buchanan

In view of the fact that one decision given by an officer governs the cases of other people, will the right hon. Gentleman, without disclosing the man's name, make available the decision arrived at in order that we may examine its implications?

Sir J. Simon

I really think the House should be prepared to accept the statement I have made. Anxiety was aroused by the statement in the Press. I noticed the statement before I got the question put to me and I made inquiries this morning, and I have seen those who are responsible. I am perfectly satisfied that the statement I have made is right. It is quite contrary to practice to publish the details of individual cases before the Special Commissioners, and I think it is the law that I should not do so. The law has not been altered in the least, and those who are exercised about trade unions may sleep comfortably in their beds.

Mr. Benn

Has the right hon. Gentleman formed any estimate of how much the Treasury will receive as a result of the decision of the Special Commissioners?

Sir J. Simon

It may amount to a few shillings.

Mr. Benn

I am not talking about this particular case.

Sir J. Simon

It is a decision which is exactly in accord with what has been the practice for the last 10 or 12 years.

Mr. Logan

In regard to the ordinary contributions for National Health Insurance and special voluntary contributions, am I to take it that additional benefits or any benefits which come from sickness will not be taxable in regard to Income Tax?

Sir J. Simon

I do not think the decision deals with that, but I am sure the hon. Member is right when he speaks of benefits which arise under the national health Acts or the Unemployment Insurance Act. I am not precisely informed about the other case, but, in any event, nobody can be touched by this provision unless they are over the Income Tax exemption limit.

Mr. Buchanan

Is the right hon. Gentleman not aware that trade unions and others have been paying superannuation benefits year after year, and that the sums in the past have not been counted in for Income Tax purposes; and that this decision makes that amount liable for Income Tax?

Sir J. Simon

The hon. Member has just said that these trade union benefits have not been taxed in the past. I will undertake that there will be no change in administration in the future.

Sir T. Moore

In view of the precedent which has now been established, may I complete my interrupted supplementary question?

Mr. Speaker

Neither at this time nor at any other time.