HC Deb 18 July 1939 vol 350 cc184-6
56. Mr. Wedgwood Benn

asked the Chancellor of the Exchequer whether the decision of the Special Commissioners for Income Tax, given on the 11th instant, in the case of Mr. Forsyth, was based upon Case 3, or, alternatively, upon Case 6, of Schedule D of the Income Tax Act, 1918?

Sir J. Simon

This decision is, I under stand, now under appeal to the High Court. The decision was that the payments to which the appeal proceedings, related were assessable to tax under Case III of Schedule D of the Income Tax Act, 1918.

Mr. Benn

That is to say the decision was that sickness benefit was; an annual payment in this case?

Sir J. Simon

I am not prepared to discuss a decision of the Special Commissioners, more particularly decision which is under appeal.

Mr. Benn

As the right lion. Gentleman has mentioned the fact that this case is under appeal, may I ask whether this particular claimant is being made to pay the amount pending the appeal or is the claim against him being waived until the appeal has been heard?

Sir J. Simon

It is quite usual for persons to appeal in these cases, and I have no doubt that in this case the appeal is being conducted according to the usual procedure.

Mr. Buchanan

In view of he wide spread interest which is. taken in this case, will the right hon. Gentleman see that the decision is published in order that it may be perused by those concerned?

Sir J. Simon

The decision of the High. Court will, of course, be published substantially, and I dare say it will attract some attention. I think I am right in saying— indeed, I know I am right in saying that the decision by the Special Commissioners was an oral decision, and was not an elaborate decision. As there is to be an appeal, I think it is plainly right that we ought not to alter the existing practice until we see what the High Court does.

Mr. Benn

The right hon. Gentleman keeps on speaking about altering the existing practice, but is it not the fact that in this case the claimant had six times been told by the collector that he was not liable, and on the seventh occasion was made to pay the six years' arrears, and that that was the alteration of practice?

Sir J. Simon

I really think it is better, if I may suggest it to the right hon. Gentleman, not to attempt to discuss the matter while the case is under appeal.

57. Mr. Benn

asked the Chancellor of the Exchequer whether, in a case where a payment is held to be liable to Income Tax tinder Case 3 of Schedule D of the Income Tax Act of 1918, it is the practice to make it incumbent upon the body making the payment, under Rule 21 of that Act, to deduct tax there from at the time of making the payment?

Sir J. Simon

In the types of cases of annual payments such as those which I assume the right hon. Gentleman has in mind, for example, payments of benefits by friendly societies to persons many of whom are in receipt of incomes below the exemption limit, it is not the practice to require deduction of tax under Rule 21 of the Income Tax Act, 1918, by the body making the payment, as that method would involve unnecessary trouble both to the recipients and to the Revenue. The alternative method is followed of assessment under Case III of Schedule D of that Act on such recipients as are effectively liable.

Mr. Bellenger

Can the right hon. Gentleman say how the appropriate society is to know whether the recipient of benefit is under the Income Tax limit or not, in order to decide whether to deduct at source or not?

Sir J. Simon

I do not think the hon. Member followed my answer, which was to the effect that there was no need to deduct at source, and that the alternative method was followed, in cases where it was necessary, of assessing directly. No one is asking them to deduct anything at the source.

58. Mr. Benn

asked the Chancellor of the Exchequer whether the decision of the Inland Revenue in the case of disabled members of the United Law Clerks Society, conveyed to that society in a letter dated 28th April, 1930, over the signature of the principal inspector of taxes to the effect that their disablement benefit or a payment dependent upon continued bad health would not be income liable to taxation on receipt by the beneficiaries concerned, stills holds good not withstanding the decision given by the Special Commissioners on 11th July,1939?

Sir J. Simon

As I have just said, the decision of the Special Commissioners is now under appeal and I feel a difficulty in discussing it. I understand that the decision supports the view taken by the Board of Inland Revenue that certain benefit payments of an annual character constitute income for purposes of Income Tax. The letter of 28th April, 1930, to which the right hon. Gentleman refers, was primarily directed to a different question, namely, the title to relief from Income Tax in respect of contributions paid by members to the society concerned. It went on, however, to state that certain benefits would not be income liable to taxation. That statement was made with out qualification as to whether such benefit payments were of a temporary character or of a continuing character such as to render them annual payments within the meaning of the Income Tax Acts. In so far as the statement can be read to apply to payments of the latter type, it does not correctly represent the view held by the board since 1925 and the general practice followed ever since that date.

Mr. Benn

In view of the answers to these questions, does the right hon. Gentleman still say that this case involves no change of practice on the part of the Inland Revenue?