§ (1)This Section applies to the relief to be granted under Section thirty-two of the Income Tax Act, 1918 (which relates to life insurance premiums and other similar payments), for the year 1939–40 or any subsequent year of assessment for any part of which the Emergency Powers (Defence) Act, 1939, is in force.
§ (2)In paragraph (a) of Sub-section (3) of the said Section thirty-two (which limits the amount in respect of which relief may be granted under that Section to one-sixth of the taxpayer's total income) the reference to total income shall he construed as a reference to total income for the year of assessment in question or total income for the year 1938–39, whichever is the higher. —'[Captain Crook - shank.]
§ Brought up, and read the First time.
§ The Financial Secretary to the Treasury (Captain Crookshank)I beg to move, "That the Clause be read a Second time"
This is a relieving clause. Under the Act of 1915, during the last war, a similar relief was granted. It arises in this way: Under the existing law there is a relief from Income Tax given in respect of life insurance premiums. There are various conditions for that relief, and one of these is that no relief is given in respect of any excess of such premiums over one-sixth of the total income of the taxpayer from all sources during the year claimed. As a result of the drop in income during the war, this limit operates very hardly in some cases. I will give an example. Supposing a man had an income before the war of £3,000 a year, the relief operated for life premiums up to 500, which was one-sixth of his total income. Unfortunately, many people's incomes have dropped materially during the war, and supposing, instead of having £3,000, the man has now £1,800, his relief for premiums becomes only one-sixth of the reduced sum of £1,800. That is to say, he only gets relief for £300, though he might still find it necessary to pay premiums for £500. Therefore, in view of the unfairness of this type of case, this Clause seeks to remedy the hardship by 1233 providing that the tax-payer's total income for the year ended 5th April, 1939, may be substituted for his total income during the year of claim. The House will be ready, I am sure, to grant this relief, as it has always attached considerable importance to the general system of insurance.
§ Mr. Benson (Chesterfield)I am not sure whether I have read this Clause correctly, but it appears to me that it applies not only to insurance policies which had already been in operation since 1938–39, but also to new insurance policies taken out at any time during the period during which this Clause would operate. The concession to pre-war insurances is legitimate, but I am not entirely convinced that the concession should be applied to new insurances. I can conceive a case in which a man, realising that there would be a serious curtailment of his income during the war, might take out an endowment policy for a number of purposes, and the result would be that, if his income was fairly high in 1938–39, the Chancellor of the Exchequer would bear a very large proportion of the cost. I shall be glad if the right hon. and gallant Gentleman will let me know whether this applies to all insurance policies or merely to pre-war insurance policies.
§ Captain CrookshankI understand that it applies to all of them, and is exactly on all fours with what was done during the Great War.
§ Question put, and agreed to.
§ Clause read a Second time, and added to the Bill.