§ For paragraphs 9 and so of the Rules applicable to Schedule E of. the First Schedule to the Income Tax Act, 1918, there shall be substituted the following paragraphs:
§ 9. In computing the tax payable by any holder of an office or employment of profit there may be deducted from the emoluments to be assessed:
- (a)such expenses of travelling in the performance of the duties of the office of employment, or of keeping and maintaining a horse or other means of conveyance to enable him to perform the same, as he is necessarily obliged to incur and defray;
- (b)any disbursements or expenses being money wholly and exclusively laid out or expended' for the purpose of such office or employment.
§
10. Where the Treasury are satisfied with respect to any class of persons in receipt of any salary, fees or emoluments payable out of the public revenue that such persons have laid out and expended money wholly and exclusively in the performance of the duties in respect of which such salary, fees, or emoluments are payable, the Treasury may fix such sum, as in their opinion represents a fair equivalent of the average annual amount laid out and expended as aforesaid by persons of that class; and in charging the tax on the said salary, fees or emoluments, there shall be deducted from the amount thereof the sum so fixed by the Treasury:
Provided that if any person would, but for the provisions of this rule, be entitled to deduct a larger amount than the sum so fixed, that sum may be deducted instead of the sum so fixed.—[Major Bruce.]
§ Brought up, and read the First time.
§ The Deputy-ChairmanMajor Bruce.
§ Lieut.-Commander BraithwaiteMay I ask whether it is your intention, Mr. Beaumont, to call the new Clause standing in the name of my hon. Friend the, Member for Bath (Mr. Pitman) (Deduction for season ticket in certain cases), which appears to deal with a similar point? If that new Clause is not to be called, will it be in Order to make reference to it on this new Clause?
§ The Deputy-ChairmanI do not propose to call the new Clause standing in the name of the hon. Member for Bath 1664 (Mr. Pitman), but it will be in Order to refer to it.
§ 7.15 p.m.
§ Major Bruce (Portsmouth, East)I beg to move, "That the Clause be read a Second time."
The purpose of this Clause is to remedy an injustice which affects a wide section of the population. It affects all that section of the population who receive wages or salary, and it would appear to necessitate certain amendments to Rules 9 and 10 of Schedule E of the Income Tax Act, 1918. Perhaps the Committee will forgive me if I read Rule 9 of Schedule E of the First Schedule, which says:
If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively, and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayedThe new Clause endeavours to modernise this rule by inserting something after the word "horse." It will be observed that in the new Clause the words,or other means of conveyancehave been inserted in order to bring the rule up to date. In point of fact, the Inland Revenue have administered this rule in a very modern fashion over the last few years, and it has been handled intelligently notwithstanding the fact that the wording may be obsolete The second purpose of the new Clause is to widen the scope of the amount allowable as expenses. This is a rather important point, because there are millions of people employed in the country who are receiving wages and salaries. The rates of tax are very onerous, and a very large amount is incurred by way of expenses in connection with the professions or occupations of these people. The essentials for the deduction of expenses for tax purposes under Rule 9 at present are, first of all, that the person who is assessed in respect of his office or employment must be "obliged" to incur the expenditure; and secondly, it must bewholly, exclusively and necessarilyincurred "in the performance" of the office or employment concerned. This has 1665 worked out in the past in a manner which has proved to be somewhat anti-social. I would like to quote a case to illustrate my point. In the case of Simpson v. Tate, a King's Bench Division case in 1925, which was reported at page 214 of the King's Bench Division Reports, a medical officer of health for a county joined certain medical and scientific societies in order that, by means of their meetings and published transactions, he might be aware of all recent advances in sanitary science, and keep himself up to date on all questions affecting public health. That is, surely, an activity which, broadly speaking, Members on both sides of the Committee would, in general, concede to be of benefit not only to the man's own personal position, if that were brought into account, but to the benefit of the particular employment which he had selected to follow as his vocation. But in that case it was held, on the interpretation of the rule, which I am seeking to amend, that the subscriptions were not money which he was obliged so to expend, and they could not be deductedI would like to quote a more recent case, and perhaps my hon, and learned Friend the Member for Kettering (Mr. Mitchison), who I hope will have the opportunity of catching your eye, Mr. Beaumont, will also have one or two cases which bear upon the subject. There is the case of a Mr. Blackwell—an inspector of taxes—v. Mr. Mills, in which it was stated to be a condition of the employee's employment that he should attend classes at the Chelsea Polytechnic. His counsel contended that since the subject matter of these classes was not unconnected with the duties which the respondent had to perform, he should be regarded as performing the duties of his office when attending those classes. But, in his Lordship's view, that was not so. The duties of his employment were those of a student assistant in the laboratories of the General Electric Company, Ltd., and it was impossible to say that when he was listening to a lecturer at the Chelsea Polytechnic he was performing those duties. These two cases give, broadly speaking, the way in which these rules of Schedule E have been interpreted in the past. I submit to the Chancellor of the Exchequer and to the Committee that the maintenance of those rules in their existing form is not conducive to the maximum initiative and 1666 enterprise on behalf of that very large number of people in the country who are engaged in employment, as distinct from carrying on businesses of their own.
The Committee may be interested to Know that when one passes to considerations affecting those covered by the phrase, "trade, profession, employment or vocation," and assessed under Schedule D, wholly different rules apply. Many of us may wonder why there has been this differentiation. If the Committee will forgive me, I should like to pass to the rules governing Cases 1 and 2 of Schedule D, wherein it is laid down that the expenses or disbursements which are allowable to be charged against profits made under Schedule D are those wholly and exclusively laid out or expended "for the purposes of"—I would emphasise the words "for the purposes of"—"trade, profession, employment or vocation." Those are very different from the rules that are laid down in Schedule E. There is no operative word "obliged" in the rule for Schedule D. There is no restrictive "in the performance of" governing the rule. It does appear that those who have the good fortune—if anybody who attracts taxation can be said to be in good fortune—to be assessed under Schedule D are able to charge expenses against profits or against revenue on a much larger scale than those in the very narrowly restricted class assessable under Schedule E. At the present time it is quite possible for a director or other official of a large limited company to take a friend out to lunch—and a very expensive lunch at that—and to charge his expenses, or have his expenses charged, for Income Tax purposes against the profits of the company. There is no such facility—indeed, this new Clause does not seek such wide facility—for those who are assessed under Schedule E. But the new Clause does ask that the position be made more comparable between the two Schedules.
The Chancellor of the Exchequer may reply that this is opening the door too wide. Our immediate answer is that the wording used in the terms of the new Clause has been taken exactly from Schedule D, and if adjusting the rules of Schedule E to the rules of Schedule D be opening the door too wide, it would appear that the door has been open too wide, at any rate, in one direction, for 1667 a very long time now. I think that, at the present time, when the Government are calling for maximum initiative from all those in industry, whether employers or employees, every conceivable reasonable encouragement should be given to those people who desire to better their position for the purposes of the employment or offices in which they are employed. In that sense I ask the Chancellor of the Exchequer to accept this new Clause.
§ Viscount Hinchingbrooke (Dorset, Southern)Could the hon. and gallant Gentleman explain the significance of Subsection (10) of his new Clause, which seems to me exactly to repeat the words in Schedule E?
§ Major BruceSubsection (10) is designed to bring the position of those in the employment of the Government into line with that of those employed in private enterprise businesses as under Subsection (9), and it broadly accomplishes for those employed in the Treasury or Government employ what Subsection (9), as we now propose, does for those employed in private enterprise.
§ Mr. Mitchison (Kettering)I support the new Clause. I am principally concerned with Subsection (9) of the new Clause. My only reason for supporting it is that I think the distinction between Schedule D and Schedule E assessments often becomes very narrow, and that those who are assessed under Schedule E are entitled to treatment at least as favourable as that of those on the other side of the line assessed under Schedule D. If I may give-two instances of how narrow the distinction between the two Schedules can be, I should like to refer, first of all, to the humble calling of share fishermen. It is difficult to say whether share fishermen are assessable under Schedule E or Schedule D, and the matter has caused a good deal of doubt. There has been, I believe, one case about it, and I think it is open to a certain amount of question whether that case was rightly decided. The Committee will remember that, when this question arose in connection with national insurance, steps were taken to treat that particular class of person as employed and, therefore, to place them under Schedule E for tax purposes.
1668 The other instance is the obvious instance of the doctor, who, 'so long as he practises on his own, is and has always been assessed under Schedule D, but who, when practising, as in the case to which my hon. and gallant Friend the Member for North Portsmouth (Major Bruce) referred, in employment, immediately becomes assessable under Schedule E. There is a remarkable difference between what he is entitled to set off by way of expenses in the one case and in the other. I suggest to the Committee that the importance of this new Clause is in regard to the particular case of expenses of travelling for the purposes of the duties of the employment, and as regards everything else that has made necessary his disbursements or expenses incurred for the purposes of the duties.
7.30 p.m.
I believe the Committee will view sympathetically the very hard case of the research student in the G.E.C. laboratory, to which my hon. and gallant Friend referred, and which it must have wrung the kind heart of the Solicitor-General to have conducted so successfully and so unfortunately in the court. That case turned entirely on the fact that that young man was improving himself in his profession; and though he was doing so with the consent of his employers, who were paying half of a good many of his expenses, yet he had to be treated as not incurring those expenses for the purposes of his duties as a student research worker; and, accordingly, his expenses were disallowed. What he was trying to do was to improve himself in his profession, and I feel certain that those Members of the, Government who have just been so willing to withdraw a tax on education in one form, will realise that in that particular case, at any rate, the strictness of the rules under Schedule E acted as a tax on education. So, in the case of a rather older man, it acted similarly with regard to the medical officer who was mentioned. There is a similar case in regard to a man who was working as an engineer for a public authority, and was not allowed to count his expenses arising from his belonging to the Institute of Civil Engineers. The substance of the difficulty is that there are cases in which, to quote what was said with regard to Schedule E:
A sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade or profession, but voluntarily and on the grounds of commercial or 1669 professional expediency, and in order indirectly to facilitate the carrying on of the business "—or profession, of course—may yet be expended wholly and exclusively for the purposes of the trade or profession.I suggest that the retention of the words "wholly and exclusively" is quite sufficient protection in practice; and that it will not be possible to use the extension, undoubtedly given by this Subsection, if it is accepted, for the purpose of any sort of evasion. Indeed, the class of person whom it is intended to protect and assist by this new Clause is not very apt to be an evader of taxes of this sort. This new Clause is intended to protect the employed person, whatever his status may be, and to put him on the same footing as regards taxation, and as regards the expenses he has to incur in respect of his job, as someone who is a professional man working on his own account.The Committee have seen, I suggest, the narrowness of the difference, and I hope the Government may be able to go some way to meet us in this respect. I fully appreciate that there are considerable difficulties in drafting—and they are well known—in connection with the Schedule D rules. It may very well be that it would be wise to consider the exact wording of this new Clause. But I hope we may have some assurance that in principle employed persons, under Schedule E, will be treated at least as well in regard to expenses, wholly or exclusively incurred in connection with their employment, as professional persons are now treated under Schedule D.
§ Colonel Crosthwaite-Eyre (New Forest and Christchurch)If I may use a phrase coined earlier this evening, I feel that the hon. and gallant Member for North Portsmouth (Major Bruce) has drawn another "cherry," and I hope the Chancellor of the Exchequer will view this new Clause in that manner. It seems to me that the real distinction between those who come under Schedule D and those who come under Schedule E has, since 1918, grown more and more artificial. The hon. and learned Member for Kettering (Mr. Mitchison) has given various examples in which it is practically impossible for at least an ordinary layman to adjudicate on whether a man is to be on one side of the fence or the other. If the Financial Secretary is replying to this Debate, I should be very interested to hear why a 1670 share fisherman, for example, is put under Schedule E. On reading these two Schedules, it would seem to me that he is much more qualified to come under Schedule D.
Apart from these minor distinctions, surely, in the present state of industry, every hon. Member of this Committee, whether he sits on this side of the House or on that, is concerned solely with trying to get the greatest production, the greatest incentive, and the greatest opportunity for people in all spheres of industry. And to maintain this distinction is to deny this. I suggest that at this present time there can be no excuse for maintaining, on the one side, the distinction under Schedule D that the words "wholly or exclusively for the purposes of" should allow one set of people to, get away with, I might almost say, any expenses they like—subject, of course, to the auditors, and to the other restrictions of the Companies Acts—and, on the other side, under Schedule E a great number of people being debarred from in any way improving their position, unless they are willing and able to pay tax on whatever sums are expended by them to that end.
There are three main categories of expenses which, I think the Committee. will agree, come under this description: entertainment, travelling and education: I cannot agree with what the hon. and gallant Member for North Portsmouth said about the mechanism for entertaining ad lib, and at the most expensive restaurants. It is, I may say, my only point of divergence. I am a director; and I acknowledge that willingly. But were I to follow the procedure the hon. and gallant Member suggested, my auditors would very soon have something to say to me. And, I think, his suggestion in this regard is going perhaps a bit too far in drawing the distinction. But why, on the one hand, should a director be able to get away with any entertainment which he certifies, and which the auditors are prepared to accept? On the other side, under Schedule E, suppose one has a salesman who is suddenly confronted with the position—this is just one instance drawn at random—where he has to entertain an overseas buyer. He has an opportunity, if he likes. to take the risk of entertaining that buyer at considerable expense to himself; consequent upon his success with the buyer he may or may 1671 not get the authority of his firm to charge that expense back to the firm. If he does get that authority, then the expense comes under Schedule D. If he does not get that authority, then it has to come out of his own pocket under Schedule E.
That is just one example, and I think the Financial Secretary would agree that at the present moment anything which invalidates our export drive, by making it difficult for people to take a chance on opportunities like that, is wrong; and that those who are in that position are just as important to industry as directors, and should be treated in the same way. It is the same with travelling. At the present time there are under Schedule D persons who can travel anywhere on the authority of their firm; there are people who can do anything which, in their judgment, may, at the time the decision is taken, be conducive to the welfare of the firm; the expenses in regard to which may be put down, in their opinion, honestly as "wholly and necessary." On the other hand, there are people who can do the same things only if they are necessarily obliged to, and they may or may not get the expenses they have incurred in a genuine effort to help the welfare of the firm.
I think that the worst examples of divergence come under education. The hon. and gallant Member for North Portsmouth has given several. If one looks at industry at the present time, whereas I think it fair to say that most firms are willing to make every possible contribution towards helping employees, particularly apprentices and young people, in their firms to get experience and education which will assist them, at the same time there are many firms, particularly today, who cannot do it. I do think it is all wrong that a young man is dependent for his progress on whether his firm can, in fact, afford to pay for him or not. That is what this distinction comes to. Without trying to enter into politics, I would point out that we had a very serious crisis earlier this year; a lot of industries have been stopped; and we are short of materials. Many firms may sincerely wish to help their apprentices by giving them opportunities, and by enabling them to learn at night schools, and by doing one thing or another to enable those apprentices, at some future date, to 1672 take a higher place in the industry than that at which they started. But those firms may be stopped; they may simply not have the financial resources available. As the present differentiation stands, the only way in which their apprentices can obtain that further education is not only by paying for it themselves, but by paying it out of taxed income. What the hon. and gallant Member for North Portsmouth was suggesting is that the whole of this artificial distinction should be abolished, and that Schedule E should be brought into line.
Before we pass from this subject, we should like to know a lot more about what happens under Clause 10 of the existing regulations. We have laid down there in the case of civil servants that the Treasury controls sums which may be considered deductable for taxation purposes by any civil servant, or in fact, anyone occupying office under the Crown. We should like to know what relaxations are afforded, and how far it is possible for someone in the junior grades to be able to learn languages, or to go to night school at his own expense, but certainly I hope not at the expense of his taxed income. The Committee would benefit very much if they knew how the Treasury apply these rules. This is a subject worthy of consideration in all parts of the Committee. At this time we depend upon enterprise, upon productivity, and above all upon giving our youth every opportunity to qualify for the difficult times ahead. By accepting this Clause we shall remove an anomaly, and we shall be doing our best to ensure that in the coming difficult years our youth is best equipped to serve the State.
§ Mr. MitchisonMay I make a personal explanation? It escaped me to mention that as a director and Member of this House, I am an employer of a Schedule E employee.
§ 7.45 p.m.
§ Lieut.-Commander BraithwaiteYour predecessor, Major Milner, was good enough to indicate that it would be in Order to make some reference to the new Clause, standing in the name of my hon. Friend the Member for Bath (Mr. Pitman), dealing with the narrower point of season tickets and setting off the cost for the purposes of Income Tax. The hon. and gallant Member for North Portsmouth (Major Bruce) described his new Clause 1673 as modernising the situation, but on whether it will be effective or not I shall express no opinion, because we must rely upon the view put forward by the Solicitor-General, who alone can say whether the wording will have the results we desire. There is no doubt at all about the need 'for this machinery to be brought up to date. There are particularly difficult problems of travel at the moment, due to the difficulty of people obtaining housing accommodation, which is anywhere near their places of employment. Only the other day, I read in the paper of a case, which I cannot think is common, of two gentlemen, one living in Westbury-on-Trym and the other living in Burnham-on-Sea. These places are about 28 miles apart, and the gentleman in Westbury is employed in Burnham, and the gentleman in Burnham is employed at Westbury. An attempt was made by these gentleman to make an exchange of their council houses. but one of the local authorities refused permission because, I think, they thought it would upset their points system. And so these two gentlemen solemnly travel 28 miles in opposite directions, each to work in the locality where his opposite number lives. That is an example of the sort of difficulty which arises at the moment, and that is why I particularly welcome the fact that this new Clause should be moved by the Parliamentary Private Secretary to the Minister of Health. We see the hon. and gallant Member in our midst a good deal—no doubt there is not much going on in the Ministry—and I am glad that he is with us to remedy one of the results of the conduct of his chief.
Vast distances are being travelled by people to their places of employment. The season ticket problem is an old problem, and particularly affects people working in offices and factories in London who live in the suburbs. It used to be said, and it may be said now, that distance is a factor in this matter. We may be asked: What about the businessman living in Brighton, travelling first class to London every day? Should he be permitted to set off his season ticket as expenses against income tax? I have always considered that this could be dealt with if a limit were put on price or distance. It is certainly a factor which should now be taken into consideration. I cannot believe that the Government are going to refuse this concession, if only for the reason that we have 1674 done it for ourselves in the House. Only last year, there was introduced a system by which hon. Members who live in the suburbs have season tickets provided for them, which is an inverted method of setting off the amount against the expenses of employment. I am quite sure that the Government will not refuse the general public something which they have done for the hard-working community in the House. It seems that a concession is inevitable, as it has now been conceded—[An HON. MEMBER: "Sarcasm"] I can assure the hon. Member that it is perfectly serious. I think it is a had thing that hon. Members should be put in this and in other matters on a different footing from the general public. That is not what we are here for. We have done this for ourselves, and I know that it is the proper thing to do if our duties are to be efficiently carried through. It was done as a result of a Select Committee, composed of all parties, and I am merely giving it as an illustration of why this Amendment ought to be accepted.
The Clause we are discussing deals with an overdue reform. My hon. and gallant Friend the Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) gave three headings under which he thought it desirable that the concession should be made, and I endorse everything he has said. The season ticket Clause is another overdue concession, and I hope, in view of the unanimity which has been shown—and so far there has been no discordant voice from either side—that the Financial Secretary or the Solicitor-General will tell us that the Government are so convinced by the overwhelming argument that they are going to accept the Clause.
§ Mr. PitmanOn a point of Order. May I speak on this Clause without prejudicing my opportunity to speak on the new Clause, standing in my name, because the two issues are so completely different that it interferes—
§ The ChairmanI am afraid that the hon. Member's Clause has not been selected. If he can conveniently make any relevant remarks now, he is a t liberty to do so.
§ Mr. PitmanThe two Clauses are very dissimilar, and the trend of thought is spoilt completely in dealing with the two subjects. I should like to speak on the main Clause, about which I have strong 1675 views, but if that is your Ruling, Major Milner, I shall have to confine myself to what is a separate issue. There are very special conditions at the present moment, applying particularly to girls who are being urged by the Government to do work in neighbouring big towns. This particular case comes from one of the constituents of my hon. Friend for Thirsk and Malton (Mr. Turton), who gave me figures of journeys made daily by girls from the villages into York. By the time they have paid for their season tickets, there is very little left for them to take home. The Government are in a dilemma. Either they have to say with one voice, to rural workers in the low income groups, "You ought to go and help the country to produce," or, with the other voice, "The expenses of your getting to work shall not come within your P.A.Y.E. calculations."
What I did in the new Clause I had hoped to move was to put two limits to it. I put a limit of income at one-third of the standard rateô3s. in the pound. So, I am not asking for this concession for anybody except the people in the lowest income groups, that is, only for those people who are paying at 3s. in the pound. These people are obviously not living away from their place of work by choice. They are living away because that is the place where they can live cheapest, and because of the present housing shortage. The second limitation is that I said that this should apply only in the case of a season ticket costing £10 per annum. I would claim to be a purist in this field, and I am not pressing the Government to extend this to all season-ticket holders, because it seems to me that it is the job of the man who is employed to get himself to work. If he likes to live a long way from his work, let him pay for it; but that is not the condition for these people who are kept in their own homes by their fathers and mothers. Those homes are the best and cheapest places for them to live in and from which to carry out their daily work. So, I plead the case strongly for them.
I would not like the Financial Secretary to say that I am doing the thing I am complaining about in regard to the complexity of the Income Tax Acts. He would be justified in throwing that one at me, but I feel that the whole question of the Income Tax Acts can be cleared up very 1676 considerably. This will mean yet another bit of calculation to be done, but there is such a thing as breaking the back Of the camel that will not work, so that you have to get a camel that will, and do it properly. This is an opportunity for the Government to give us this concession, at any rate temporarily, while they are working out 'a set of Income Tax laws which apply to the weekly wage earner, and are not an anachronism.
§ Mr. Glenvil HallThe object of this new Clause can be summed up in this sentence: it is to make the test for expenses allowance under Schedule E the same as for expenses allowance under Schedule D. The general position is that, under Schedule D, expenses to be allowable, must be wholly and exclusively laid out or expended for the purposes of the trade or profession The operative words for those who come under Schedule D are "for the purposes." Under Schedule E, the expenses must be wholly, exclusively, and necessarily expended in the performance of the duties of the office or employment, and the operative words are "necessarily" and "in the performance of." The courts have held that the words of Schedule E cover only expenses incurred of necessity by every holder of a particular office or employment; that is, the expenses they will allow must be the type of expenses they will allow to every holder of an office or employment.
But that does not follow when we come to Schedule D. There, whether the expense is allowed depends upon whether the person who incurred it can substantiate it, first to his auditors, and then to the Inland Revenue. That is the great difference between the two. It is my case that there is no real analogy between those who are assessed under Schedule D and those who are assessed under Schedule E. It is true, as my hon. and learned Friend the Member for Kettering (Mr. Mitchison) pointed out, that there are border-line cases—and the hon. and gallant Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) mentioned one type of fisherman —but that does not affect the principle. It is the principle which the Inland Revenue have to go on, and it is broad principles on which we have to legislate. It is almost exclusively true that the Schedule E man is paid a fixed salary 1677 for a particular job. It can be ascertained with a fair degree of exactitude whether certain expenditure connected with that fixed job is or is not necessarily incurred in the performance of the duties of his office or profession. But when we come to the Schedule D man he is not working for an employer; he is working for himself. He does not know what his profit or his income for that year will be. He may guess, but he does not know. It is necessary for him voluntarily to expend certain sums on the earning of the profits on which he is afterwards assessed.
8.0 p.m.
I think the Committee will agree that the expenses allowed in these two categories are different. They can be distinguished. If we begin now, at this late date, to allow to the Schedule E Income Tax payer, who has a fixed emolument, and who is working for someone else, the same expenses as we allow to a man under Schedule D, we shall open the gate wide indeed, and land ourselves in considerable difficulty. Therefore, we are unable to accept this new Clause. Cases which have gone into court have been quoted to indicate that there is hardship on the young fellow or young girl who goes to evening classes, and spends money on books and attending lectures, which cannot be charged as expenses. Undoubtedly, that is so, but we cannot, because there are cases of hardship of that sort, open wide the gate in the way this new Clause would do, because that would mean a number of expenses would have to be allowed which were legitimate in themselves, such as have been quoted. The hon. and gallant Member for North Portsmouth (Major Bruce) quoted the case of Simpson v. Tate. I have here part of the judgment in that case, and I cannot put it better than in the words of the judge. He said:
I think that all subscriptions"—he was talking about subscriptions to learned societies and to periodicals, but the underlying principle is the same—to professional societies and all taking in of professional literature and all that sort of expenses which enables a man to keep himself fit for what he is doing are things which can none of them be allowed. If they were allowed, every professional man would say, 'I have to belong to this and I have to belong to that society; I have to take in this publication and I have to take in that publication, and to do 1678 all sorts of things, and there would be no end of it. I think the principle is quite clear. Nothing of that sort can be allowed.
§ Mr. MitchisonIs it not a fact that subscriptions and expenses of that sort are allowed under Schedule D? The question is, are they to be allowed under Schedule E as well? Before the right hon. Gentleman commits himself any further, may I express the hope, on behalf of the mover of the new Clause and myself, that if nothing can be done as regards family and other matters, with which we are very little concerned now, can he not allow some form which would meet the educational side?
§ The ChairmanThat is a matter which I think will arise on a new Clause which I propose to call later.
§ Mr. Glenvil HallI agree, and, therefore, I will not answer my hon. and learned Friend, except to say that I realise that there is a distinction, and any hon. Member who is also a member of the Bar will know that if he buys a legal book tax deduction is not then allowed, but if he renews it, it is allowed. There are all sorts of anomalies of that kind. We shall be dealing with that later. It is true that this exception is allowed, but it is not allowed to doctors and other professional men who happen to be working under the Minister of Health for fixed salaries. We can elaborate that when we come to the new Clause to which reference has been made.
The hon. and gallant Member for New Forest and Christchurch asked me to make some observations about Rule 10. Rule 10 embodies for public servants and those who are paid from public funds the same provisions as are contained in Rule 9 of Schedule E. The hon. and gallant Member for North Portsmouth would put the expenses allowances under Rule I() on all fours with those which now come under Rule 9. Of course, the two hang together, but, as I have indicated my right hon. Friend cannot accept the new Clause relating to Rule 9 and he cannot accept it in regard to Rule 10.
Rule 10 makes special provision under which the Treasury can fix a flat rate deduction for classes of persons paid hum public funds on the basis of an annual average scale of expenses which may reasonably be said to fall on them in the course of their duties. I was asked if I 1679 would indicate the class of person who was given the advantage of this rule. Members of Parliament are. As every hon. and right hon. Member knows, we. are allowed, without question, £100 a year as a set off against what we spend on secretarial assistance, postages, stationery, telephones and certain other expenses which fall on all of us. We are given this £100 under this particular rule. No civil servant, so far as my information goes, is allowed any allowance or expense under this rule. But, for instance, Officers of the Services come under it, and get allowances for uniform and other things. I can assure the Committee that the number of these allowances is not large and that the people concerned do not include any civil servants.
§ Mr. PitmanIs the right hon. 6entleman correct on that point? I think civil servants can be included under Rule Io: for instance, land officers travelling about and using their cars to visit properties.
§ Mr. Glenvil HallThere are not so many of them travelling about now in their own cars. During the war many of the cars became so old that the State had to provide them with cars until the old system could be reintroduced. In cases of that kind they are repaid what they have expended. That is a definite type of allowance which is a fixed allowance given year by year, based on what is considered to be a reasonable outlay, and prevents them from doing what many people have now to do under Rule 9, which is to make to the Inspector of Taxes a return accompanied by some sort of evidence as to what they have actually spent in the course of a year by way of expenses in making their profit.
§ Mr. PitmanPossibly there is a misunderstanding, or I have misheard the Financial Secretary. I understood him to say that no civil servant gets any allowance under Rule 10.
§ Mr. Glenvil HallThat is my information. When I was asked a question by the hon. and gallant Member for New Forest and Christchurch, I think he particularly mentioned civil servants in the course of his remarks.
§ Colonel Crosthwaite-EyreCan the right hon. Gentleman say what sums are allowed for educational purposes?
§ Mr. Glenvil HallIf the hon. and gallant Member is referring to civil servants, the answer is, "None." I have checked that during the discussion. Whether they should be made an allowance under this or some other rule is, of course, a question for debate, perhaps at another time.
I understand that I am expected to make some reference to the subject of the Clause on the Order Paper in the name of the hon. Member for Bath (Mr. Pitman). I do not quite know the basis upon which he has elaborated his Clause. He talks here of making an allowance towards the cost of any monthly or yearly season ticket. What the quarterly season-ticket holder has done to annoy him, I do not know, but apparently he has no place in the Clause for anyone but a monthly or yearly season-ticket holder; nor does he mention the individual who has to travel regularly by tram or 'bus. Therefore the wording of this Clause in any case could not be accepted. But neither could the principle underlying it. It has been a well-established rule for very many years that the cost of travelling cannot be taken as an expense for Income Tax purposes. It is true that during the war, because of the difficulties, a special change was made which permitted a person who was involved in extra travelling costs because his residence or place of work had changed through circumstances connected directly or indirectly with the war was allowed to apply for, and get, a £10 special allowance, That, of course, cannot continue indefinitely, and it certaily cannot be enlarged to include anyone. because as has been laid down for many years in more than one case, it is a fact that persons live where they will. It is for them to decide, and the expense of getting to work cannot be allowed as an Income Tax expense.
It could be argued that that means hardship for some people. One individual may live at Southend and have to come up to London for a job, whereas another, who is fortunate enough to live in Kensington and to have a very small 'bus or Underground fare to pay, is therefore not spending as much as the first one. These things, however, even themselves out, and it is very likely that the person who lives at Southend may be paying a cheaper rent than the person who lives in Kensington. Nevertheless, it has been through the years a fixed rule thoroughly 1681 embodied in our Income Tax law that people must live where they will and that we cannot allow travelling expenses as expenses for Income Tax purposes.
§ Lieut.-Commander BraithwaiteWould not the right hon. Gentleman agree that it is still the case, during the aftermath of war, that many people are not living where they will, or anything like it? A man whose house has been bombed and who may have had to move, through no volition of his own, to other accommodation 20 miles away cannot be described as living where he will: he is living where he has got to.
§ Mr. Glenvil HallI did not say that everybody was now living where he would. That was not my contention. I was simply saying that normally, so far as Income Tax law is concerned, no account whatever is taken of where people live, and no allowance is made for fares because one person lives a long way from his work and another lives quite near. The only inroad into that rule which has been made is the one that was made during the war and which allowed a person up to £10 because of the special circumstances of the war. I am only saying that that obviously cannot be continued, unless of course the House wills that it should be continued. It is our view that we should not enlarge that breach, because if we did it would lead to a very large number of anomalies. For one thing, if the new Clause moved by the hon. Gentleman the Member for Bath (Mr. Pitman) were accepted, apart from its being partial in its incidence, it would he very unfair on somebody who happened to spend just over £10. If he or she did they would not have the benefit of this Clause. It would also make great inroads into the coding of P.A.Y.E. I am informed it would be impossible to work P.A.Y.E. for a large section of the community, because no one would know in advance what they were going to spend and whether it would be under or over fro or whether they would come within this 3s. limit. Those and other considerations make it impossible to accept the Clause and I would ask the Committee to reject it.
§ 8.15 p.m.
§ Major BruceI should like to say how much my hon. Friends and I are disappointed in the right hon. Gentleman 1682 being unable to accept either the wording of the Clause or the spirit behind it. I should like to deal very briefly with the last point. The right hon. Gentleman implied that if allowances for expenses were allowed on a large scale to people assessed under Schedule E it would make P.A.Y.E. unworkable. If I may say so, that is entirely beside the point. Every person who is assessed under Schedule E, even though they may have their tax deducted week by week, have the right —and it is a right which should be more widely known—at the end of the year of insisting that they shall have their whole tax position reviewed and any expenses to which they are entitled adjusted. I do not think that the point made by the right hon. Gentleman is one of substance.
The right hon. Gentleman said that the case put forward by myself, the hon. and learned Member for Kettering (Mr. Mitchison) and other hon. Members proposed to bring these persons on all fours with the class of person under Schedule D. That was not the purpose at all. It was the purpose to bring the position of the taxpayer who is assessed under Schedule E, that is the wage and salary earner, into rather more close conformity with the person engaged in trade, commerce and business who is assessed under Schedule D. Had the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) read the Clause put forward by my hon. Friend and myself more closely he would find that travelling expenses are not affected by it, and the position in regard to them remains exactly the same as under the original Schedule E Rule.
The right hon. Gentleman the Financial Secretary based his case on the opinion that there was some fundamental difference between those classes of people who were assessed under Schedule E, the salary and wage earner, and the persons assessed under Schedule D, who conducts his own business or company or whatever it might be. He implied that the company or the trader or the professional man assessed under Schedule D should as a right remain indefinitely in a much superior position than those employed on a salary or wage basis. By some kind of divine right this is to be allowed to be continued. Though the right hon. Gentleman said that if he accepted this Clause it would open the door wide, nevertheless there was no indication in his speech of 1683 closing the door in regard to Schedule D which would thereby be open to abuse.
It is not the purpose of those who put forward this new Clause to open the door wider in regard to entertainment expenses and things of that kind which we know are commonly allowed at the present time under Schedule D. The purpose was that those people who had the good fortune or otherwise to be in employment, if they desired to improve their own position, would be entitled to deduct from their Income Tax assessment as much money as they had expended for this particular purpose. It may be that the wording adopted in this new Clause is a little wide, and that to that extent the right hon. Gentleman is justified if only on the grounds concerning too much entertainment expenses. But that is not the purpose of the Clause at all. I and my hon. Friends on this side may take the opportunity on Report stage of moving a further Amendment which may narrow the proposal down to the desired limits and which, we trust, will present the right hon. Gentleman with such an unanswerable case upon the narrow field that he will be unable to resist. In those circumstances, and with this in mind, I beg to ask leave to withdraw the new Clause.
§ Mr. Baldwin (Leominster)I should like to say a few words in support of my hon. Friend the Member for Bath (Mr. Pitman) in connection with wage-earners. There are small pockets of unemployment throughout the country and it is desirable that the men in those districts should be able to search for a job. It may be that work is available some distance away by bus or train, and it seems to me that a certain allowance would be of advantage in encouraging people who now queue at the employment exchange to go a short distance to look for work. I cannot see that there need be any abuse; the railway or bus ticket could be handed in by the man concerned after he had completed the journey. I would ask the Financial Secretary to give this matter a little more consideration.
§ Question put, and negatived.
§ Mr. MitchisonOn a point of Order, Major Milner, I thought that the hon. Member who moved the Question for the 1684 Second Reading of this new Clause had asked leave to withdraw it?
§ The ChairmanThe hon. Gentleman the Member for Leominster (Mr. Baldwin), who spoke subsequently, has, by implication, objected to the Clause being withdrawn.
§ Mr. StanleyOn that point of Order, Major Milner. You may not be aware that during your absence from the Chair the Deputy-Chairman gave an entirely different Ruling. He ruled that, provided the question of leave to withdraw had not been put from the Chair, the fact that one or two hon. Members intervened to speak did not prevent him subsequently putting that Question. It is not a point of any great importance on this occasion, but since we have had two entirely contradictory Rulings from the Chair within a space of one and a half hours, it might be a good thing to have the matter cleared up.
§ The ChairmanI am obliged to the right hon. Gentleman, but he will appreciate that circumstances alter cases. I do not know the precise circumstances in which the earlier Ruling was given, but I imagine that they differ from these. However, I will consult with the Deputy-Chairman as to the difference, if there be one.
§ Mr. StanleyAlthough I entirely agree with you, Major Milner, that circumstances alter cases, do they always alter Rulings from the Chair?
§ The ChairmanCertainly, if the circumstances differ.
§ The following new Clause stood upon the Order Paper:
§
(Motor vehicle taxation.)
On and from the date as from which the rate of the Customs Duty payable under Section two of the Finance Act, 1928, on hydrocarbon oils shall be increased from nine-pence per gallon to one shilling per gallon, Section thirteen of the Finance Act, 1920 (which imposes excise duties on mechanically propelled vehicles) shall have effect as if the paragraphs and sub-paragraphs set out in Parts I, II, III, IV and V of the Schedule (Amended rates of duty in the case of certain mechanically propelled vehicles) to this Act were respectively substituted for paragraphs 1, 3, sub-paragraphs (d) and (e) of paragraph 4, and paragraphs 5 and 6 of the Second Schedule to the said Act of 1920 except in, to tai its the last mentioned paragraphs and sub-paragraphs relate to vehicles propelled by electricity, gas
1685
or steam, provided that nothing in this Section or in the Schedule (Amended rates of duty in the case of certain mechanically propelled vehicles) to this Act shall be deemed to alter or revoke the provisions of any enactment granting exemption from liability for additional Excise Duty in respect of a vehicle. It used for drawing a trailer.
§ The ChairmanThe new Clause standing in the name of the right hon. Gentleman the Member for Bristol, West (Mr. Stanley) is out of Order.
§ Captain Crookshank (Gainsborough)On a point of Order, Major Milner, may we know for future guidance why it is out of Order?
§ The ChairmanThe first reason is that it may impose a charge upon the Exchequer. The second reason is that the date is a hypothetical one. The right hon. and gallant Gentleman will appreciate that any question of duty must come within the current Income Tax year, and that is not necessarily the case under the term of the new Clause in question.
§ 8.30 p.m.
§ Captain CrookshankWith all respect, Major Milner, could you tell me how it is likely to impose a charge? As we drafted it, we were careful to try to make certain that it will not impose any extra charge. I fail to see any words which would justify that point. On the second reason, may I submit that the case, being hypothetical, is not necessarily out of order, because there have been previous occasions, on which, for example, the words "appointed day" were referred to? If you will look at the Finance Act, 1941, you will find a reference there to:
such date as Parliament may thereafter determine—which is a very hypothetical date, and is for allowances to come into effect. It would, therefore, seem that because no set date is inserted the new Clause is not necessarily out of Order.
§ The ChairmanI can only say to the right hon. Gentleman that I have taken the best advice available and on the information given to me the new Clause might impose a charge. That being the case, I have no alternative but to rule it out of Order.
§ Captain CrookshankI am sorry to persist. It seems so very mysterious. We have done our best to find out if it could conceivably do that, and I was only ask- 1686 ing, for our guidance, where this likelihood emerged. We have entirely failed to find it. If, however, it is anything to do with the first two and a half lines down to the second "per gallon." would it be in Order to move the new Clause without those words in the form of a manuscript Amendment beginning at "section thirteen"? For the sake of the argument and the point we want to put before the House, it would be equally valid if those words were omitted.
§ The ChairmanI have every desire to assist the right hon. and gallant Gentleman, but these matters are extremely complicated and I am afraid that it would not now be possible to give consideration to a manuscript Amendment in that form and I doubt if it would dispose of the whole question. I am sorry.
§ Mr. StanleyI know that this is a very difficult matter but it raises a point of great importance and one on which, as we have been assured by all the Sunday papers, the morning papers and now the evening papers, the Chancellor of the Exchequer is extremely anxious to make a statement. Will there be any possibility on the Committee stage of this point being raised and, if so, would it be possible for you, Major Milner, to indicate where?
§ The ChairmanThere is another new Clause on the Order Paper in the name of the hon. Member for Widnes (Mr. Shawcross) dealing with the question of motor taxation which it is my present intention to select (Amendment of Finance (No. 2) Act, 1945, and Finance Act, 1920). It may be—I do not know—that the Chancellor of the Exchequer may desire to make a statement on that, but I have no information on the point.
§ Mr. StanleyThat is what I am worried about. Looking at the new Clause in the name of the hon. Member for Widnes I read:
For the purposes of this section the appointed day shall be such day as the Treasury may by order appoint.As you gave your Ruling, Major Milner, it passed through my mind that there is nothing in that Clause to ensure that that day should be appointed during the present financial year. Therefore, I came to the reluctant conclusion that on your Ruling on the other Clause you were also going to rule the Clause in the name of 1687 the hon. Member for Widnes out of Order and that, therefore, there would be no opportunity whatsoever for this important matter to be discussed. If that is not the case it would be very much for our future edification if it could be explained why the words:for the purposes of this section the appointed day shall be such day as the Treasury may by Order appoint.are more specific and less hypothetical than the words in our Clause.
§ The ChairmanI had formed the opinion that the appointed day is capable of being made certain if the Chancellor agreed to the change in the rate.
§ Mr. StanleyOurs could have been.
§ The ChairmanNo, the distinction between the two Clauses is a very clear one. The right hon. Gentleman's new Clause is dependent on a second hypothesis namely the increase of the duty on oils and it is on that date that the date on which the new motor vehicle duties are to come into operation would depend.
§ 8.30 p.m.
§ Captain CrookshankOn the point I was submitting, Major Milner, about imposing the charge, can the secret now be revealed?
§ The ChairmanI can only tell the right hon. and gallant Gentleman that this new Clause might impose a charge. The right hon. and gallant Gentleman knows as well as I do that that is one of the grounds on which a new Clause may be ruled out of Order and that being so, I have ruled it out of Order.
§ Captain CrookshankI agree with you, Major Milner, if I may respectfully say so, that that is the normal ground for ruling a Clause out of Order. All I was trying to find out was, what in this Clause calls for that Ruling. I am sorry, but I still consider it must be some secret.
§ The ChairmanMr. Daggar.