HC Deb 28 March 1944 vol 398 cc1246-9
52. Major Sir Derrick Gunston

asked the Chancellor of the Exchequer if his attention has been called to the recent judgment in the King's Bench Division whereby the £2 per acre grant for ploughing up old grassland was held to be liable for Income Tax; and whether, in view of the continued necessity of increasing the ploughing up of old pasture in order to grow more food, he will take steps to remove this anomaly.

55. Squadron-Leader Donner

asked the Chancellor of the Exchequer whether his attention has been drawn to the finding in the King's Bench Division by Mr. Justice MacNaughton that the £2 per acre grant paid for ploughing up grassland is subject to Income Tax and not a capital payment exempt from tax; and what measures he proposes to take to ensure that farmers will receive the full benefit of the £2 grant and are, in addition, safeguarded against retrospective taxation as from the date of the grant.

59. Lieut.-Colonel Dower

asked the Chancellor of the Exchequer if he is aware that the Inland Revenue claim Income Tax on the £2 an acre subsidy paid to farmers for ploughing up old grassland; and will he take steps to see that this anomaly is corrected with retrospective effect as this was never made clear to farmers at the time the subsidy was introduced.

62. Lieut.-Colonel Sir Ian Fraser

asked the Chancellor of the Exchequer if, in view of the judgment given in the King's Bench Division that the ploughing-up subsidy is subject to tax, he will insert a clause in the Finance Bill to make it clear that such payments are not subject to tax.

Sir J. Anderson

The decision of the High Court in regard to the ploughing grant was that it fell to be treated for taxation purposes as a payment towards the expenses of ploughing the land and bringing it into a state of cleanliness and fertility. While the payment thus is included as a receipt, the actual expenses of the ploughing and other cultivations, which I may observe are usually greater than the grant, are allowed as a deduction in the computation of the farming profits.

The effect therefore of the decision is not simply that the subsidy itself is liable to tax but that the subsidy as well as the expenses towards which it is given are both taken into account in arriving at the balance of profit, and I cannot agree with the suggestion in the questions that such treatment, which is that accorded to traders generally in respect of any payment towards their expenses, involves any anomaly.

Sir D. Gunston

Is it not a fact that this grant of £2 an acre which was originally given by the Government for ploughing up old pasture, was looked upon as a capital payment; and is it not a fact that even if it was looked on as liable to Income Tax, the tax was then 7s. in the £? Since then the tax has gone up to 10s. and prices have increased.

Sir J. Anderson

I think the hon. and gallant Member is overlooking the other consideration, that the increase in the rate of tax increases the value of the allowances for expenses as a deduction in computing tax. As to whether it is to be regarded as capital, the late Sir Kingsley Wood, in the course of last year, made it quite clear that the view of the Government from the outset had been, as indeed is borne out by the wording of the Act under which the grants are made, that these grants are contributions in aid of expenditure.

Sir H. Williams

If this payment is treated as a capital payment, the allowances will still be deductible expenses in respect of the farmer's other income. Really, has not the Chancellor muddled up the whole issue by bringing in the question of expenses?

Sir J. Anderson

I do not think so. Neither did the High Court think so.

Sir Joseph Lamb

Is it not a fact that this agreement was made with the industry on the understanding that this would not be liable to Income Tax?

Sir J. Anderson

That is certainly entirely new to me.

Brigadier-General Clifton Brown

Did not the whole agricultural industry think that they were getting £2 an acre; and will not this have a very bad effect on the future policy of the Government?

Sir J. Anderson

I am sorry for that, but the wording of the Statute is perfectly clear that this was a contribution towards the special cost of ploughing up.

Lieut.-Colonel Dower

Is the Chancellor aware that these farmers do not find that this keeping of highly complicated accounts is easy? They are not like ordinary trade and business men, and would it not be much fairer to them if this was not regarded as a source of income?

Mr. Vernon Bartlett

In view of the complications on this point, may I ask the Chancellor whether his answer means that the Government take the money out of the farmer's right-hand pocket and put it back in his left-hand pocket?

Sir J. Anderson

No, Sir, what the answer means is that the expense to which farmers are put in carrying out the policy regarding the ploughing up of land is, in fact, reduced for all purposes by the amount of the subsidy.

Sir D. Gunston

In view of the very great anxiety which this decision has caused, and the necessity for ploughing up more grass land, will the Chancellor receive a deputation of hon. Members of this House?

Sir J. Anderson

I shall be very glad to receive any representations.

Sir H. Williams

rose—

Mr. Speaker

We cannot spend all Question Time on one Question.