§ 81. Sir W. Davisonasked the Chancellor of the Exchequer whether he is 722 aware that Surtax payers who have made their returns for Surtax for the year 1940–41 have subsequently received an intimation from the Commissioners of Income Tax pointing out that in making returns for Surtax the amount returnable is not the amount of dividend; plus the tax deducted therefrom, which in the year in question was at the rate of 7s. 6d. in the £, as shown on the counterfoils of the relevant dividend warrants, but that the amount of the return should be the gross amount appropriate to the new rate of 8s. 6d. in the £ imposed by the Finance (No. 2) Act, 1940, namely, the amounts obtained by adding to the net amounts received 17–23rds thereof; and whether steps will be taken in future to see that taxation is not dated back so as to include amounts which were not included or payable at the time when the dividends in question were received?
§ The Chancellor of the Exchequer (Sir Kingsley Wood)The intimation to which my hon. Friend refers is, of course, an intimation of the requirements of the law. The law provides in Sub-section (3) of Section 12 of the Finance Act, 1930, that where Income Tax has been deducted by reference to a standard rate greater or less than the standard rate for the year in which the dividend becomes due, the net amount received is to be deemed to represent income of such an amount as would, after deduction of tax by reference to the standard rate for the year, be equal to the net amount received. This rule, which was laid down by Parliament in order to simplify the ascertainment of gross income, operates when the rate of tax falls as well as when the rate rises and it operates in relation to claims to repayment of tax as well as to the computation of income for Surtax purposes. I do not think that the rule is inequitable, for it links the rate of tax to be added to the net dividend to the rate of tax payable by the company for the year in which the dividend falls due, and I should not feel justified in accepting any suggestion that it should be altered.
§ Sir W. DavisonIs my right hon. Friend aware of the very heavy work involved in making these returns in respect of income which has never been received by the taxpayer, and does he realise the additional work and irritation caused by having to add on 17–23rds to the items already sent in? Although 723 Parliament passed this provision, I do not think they were aware that all the returns would have to be made again.