CLAUSE 37.—(Expenses allowances, etc. (Hansard, 22 June 1948)

§ Mr. Assheton
I beg to move, in page 27, line 15, at the end, to insert: and for the purposes of this Part of this Act expenses of travelling between such place as a director or person employed in an employment to which this Part of this Act applies may elect as constituting his principal place of business and any other place at which his duties require him to attend as a director or employee whether of the same or of any other body corporate shall be deemed to be money expended wholly, exclusively and necessarily in performing the duties of the office or employment. I hope that the Financial Secretary, or possibly the Solicitor-General, will tell me that this is an unnecessary Amendment, and that its intention is already provided for. This point is a narrow one but it is important, and I hope that the right hon. Gentleman will give his attention to it. At the present time, the normal rule is that one has to pay one's travelling expenses to the place where one usually works. If one works in an office in the City of London and comes up every day from Reigate, one has to pay one's travelling expenses in going to and from the office, the theory being that one should live as near as possible to one's work, and if one chooses to live at a greater distance than is easily accessible to one's work, one suffers for it.
I am given to understand that as this Clause is drawn, it will have an unfortunate affect. Let us imagine a man who is in business as a solicitor in Manchester, and who is on the board of an insurance company in London. He has to come to London once a week to attend a board meeting of the insurance company. That man is normally every day going to his business in Manchester. One day a week he has to go from Manchester to London and back. Hitherto, he has been entitled to charge the expenses of his journey to London, and, if necessary, 1208 the cost of staying the night in London as expenses against his income. How does that work out in practice?
Supposing that man is paid £500 a year for being a director of this insurance company, and he goes once a week to London; he would be earning, therefore, approximately £10 a visit, and if that a £10 is taxed it would leave him with £5 10s. on the assumption that he is not a Surtax payer. If he were a Surtax payer, it would leave him with considerably less. Out of the £5 10s., he has to pay his travelling expenses to London and back, and the cost of staying the night in London, which would absorb in many cases more than the total amount of his fees, and therefore it is clear that it would not be profitable for him to continue in that business. I do not think that that can be the intention of the Government because it is obviously unreasonable, but I am a little anxious that it may be so because this has arisen in the past with regard to recorders. They have felt very badly treated in the past and are still badly treated.
If one happens to be in practice as a barrister in London, with chambers in the Temple, and one takes the honourable but not very remunerative occupation of being a recorder in some not very important place at a considerable distance from London, and one has to travel four times a year to that place and stay there while the sessions are on and then return, one is not allowed to charge the expenses of those journeys against one's income and one finds oneself working for nothing. A certain number of gentlemen are no doubt in a position to do that, but it is not a very intelligent way of working the Income Tax law.
I am informed—and the Solicitor-General will tell me if I am right—that this unfortunate experience which recorders have had to suffer, and which 1209 I would like to remedy—and I hope that this Amendment will do so, or, if not, that it will be altered to do so—is now to be imposed on directors, and will chiefly apply to those who live in the provinces and come to London, but it will equally apply to those who live in London and go to the provinces. If this matter is not already provided for somewhere in the Bill, I hope that the Government will now tell us that they intend to provide for it.

§ The Solicitor-General
The proposal which the right hon. Member for the City of London (Mr. Assheton) has in mind would work a radical departure from the principles upon which travelling expenses are treated for the purposes of Schedules D and E taxation under Rules 3 and 9. The principle, which in that respect is not affected by these new expense provisions, is that the cost of getting to work is not an expense which one can deduct from the emoluments one receives from one's work under Schedules D or E. If one's work requires that one must, in the course of it and for the purpose of it, travel between two places, one can treat the cost of getting between those two places as an allowable expense.
Suppose, as the right hon. Gentleman mentioned, there is a director of two or three different companies, the board meetings of which take place at different times, the right hon. Gentleman's suggestion is that he should be allowed to treat as deductions from his director's fees, or earnings as an employee in any other capacity of the companies concerned, the cost of getting to the place of business of those companies. That, for all ordinary purposes, cannot be allowed, and there is no real reason why an exception should be made against the general principle relating to the treatment of this sort of travelling expense in the case of directors and highly-paid executives to whom Clause 37 and the succeeding Clauses relate. In time this would perhaps seek to make in other cases a general exception.
If we take a solicitor who has a place of business in London and a place of business in Manchester, and his work as a solicitor requires him to travel between those two places of business, the cost of getting between one and the other is an allowable expense against his earnings. In 1210 the case of the recorder, as the case of Ricketts v. Colquhoun decided some time ago, the cost to which the recorder is put in getting to the place in which he sits as recorder is not an expense which he incurs in the carrying out of his duties as a recorder.

§ Mr. Assheton
Can the right hon. Gentleman justify that?

§ The Solicitor-General
Yes. Unless we completely recast Rule 9 of Schedule E and Rule 3 of Schedule D, the principle on which these two rules are based excludes that type of expense because it is not an expense which the person incurs in doing his duties but an expense which he may incur before beginning to do those duties. Hon. Members on both sides of the House, I have no doubt, would like no taxes at all, but if we must have taxes, we have to work them on a reasonable and logical basis and to start from a particular point. The point of accepted travel for purposes of Schedules E and D is the point where one begins to do one's work—something that one does when one gets to one's work; not something that one does before one begins work.
Let us take the case of a person living in London who accepts employment in Oxford with the result that he has to go between London and Oxford to do his work. If a man accepts work at a place 60 or 70 miles from his place of abode, that is his own concern. We do not decide where he will accept the work; he must decide that for himself and whether the renumeration is sufficient to make it justifiable from his point of view to involve himself in the expenses of travelling. In a Debate of this sort, once one begins to go from instance to instance, one can reach undefinable limits. One has to confine oneself to the general principles, and ask oneself whether there is sufficient reason, in the case of these directors and highly-paid executives, for making an exception to the general rule which applies to all persons taxed under Schedule E in respect of their emoluments from employment.
I do not believe the right hon. Gentleman would contend that. I think that in moving this Amendment he was actuated by the general feeling that Schedule E works out unjustly; but, assuming that Schedule E remains in its 1211 present form, I feel he would not go to the length of saying there was any case for making an exception, in the case of directors and highly paid executives, from the ordinary principles on which Schedule E is based.

§ Sir Frank Sanderson (Ealing, East)
Would the Solicitor-General clarify the position? In the case of a Member of Parliament travelling from Aberdeen to London to attend Parliament, travelling expenses would be paid. Is it suggested that in the case of a man who has to travel from Aberdeen to London to attend a directors' meeting those expenses should not be permitted?

§ The Solicitor-General
That has been the law for a long time.

§ Mr. Assheton
Oh, no.

§ The Solicitor-General
The case under the Amendment has nothing to do with the provisions of the 1918 Act. The Member of Parliament who travels from his constituency—I am assuming the hon. Member means the constituency is Aberdeen—

§ Sir H. Lucas-Tooth
No, his home.

§ The Solicitor-General
Then he does not get it.

§ Sir H. Lucas-Tooth
Yes, he does.

§ The Solicitor-General
Whatever the position of a particular person, the question is: are we now, in the case of this particular type of director and highly paid executive, to alter Schedule E? If Schedule E stands, there really is not a case for altering it for such a person. A Member of Parliament who goes to his constituency gets his ticket.

§ Mr. John Foster (Northwich)
And to his home.

§ The Solicitor-General
And to his home. I am not justifying or condemning the system by which a Member of Parliament gets certain free travelling facilities. That is a matter which does not arise within the scope of this Amendment. The Member of Parliament gets travelling facilities because it has been thought that there is sufficient and good reason for allowing him those facilities; he could not carry out his duties otherwise. That is a special 1212 concession, and not an Income Tax concession; it has nothing to do with Income Tax; it is a special travelling facility which is made available to him. Apart from those travelling facilities, Members of Parliament are, of course, taxed in the ordinary way under Schedule E. Their taxation, apart from any facilities of that sort which are specially provided for them and have nothing to do with the Income Tax Acts, depends upon the application of the ordinary rules formulated under Rule 9 of Schedule E. For those reasons, I hope the House will agree that there really is not any case for this Amendment to apply to this specific class.

§ Mr. Assheton
Could the Solicitor-General clarify one thing? Did he say that the law was not being altered? I suggest that at the present time such expenses may be charged.

§ Mr. Pickthorn
I want very shortly to put only one point to the Solicitor-General. Five or six times he used the expression "highly paid executive," and I should like him to explain that, if he will. Did he mean to indicate that there was some difference in the application of the law in this matter according to whether one was highly paid or not highly paid? Or was he merely endeavouring to import prejudice? What was the object of using that epithet half a dozen times? It was the more striking because of the exposition of the Income Tax law beginning to apply at the point at which the work was begun, which must have brought to the minds and memories of a good many hon. Members the law about accidents in the course of or arising out of employment, because there it certainly is not held that there is no liability until the moment at which the work is begun. Therefore, I should have thought it all the more necessary to ask for an explanation. Is it suggested that the law is, or ought to be in this respect, different according to the remuneration of the person concerned; and if so, what is the ceiling below which the law is different?

§ Mr. Foster
I think it a little anomalous for a Member of Parliament like the Solicitor-General to object in principle to a person in the situation envisaged by this Amendment, getting his travelling expenses allowed against Income Tax, when a Member of Parliament, travelling from 1213 his home which is not in his constituency gets an entirely free travelling allowance. I quite agree that it has nothing directly to do with Income Tax, but it is even more advantageous as a concession, because the Member of Parliament gets the whole thing free. What we are asking in this Amendment is that a person in a similar situation, who has to travel from one place of business to another, should get a travelling allowance against Income Tax.
The Solicitor-General mentioned a person with employment in Oxford, about 60 miles from London, and said that it was open to him to accept or refuse that employment, and that he would calculate whether it was worth it. In the case of a recorder, while it is true that there must be plenty of other people on the circuit who could do it as well, I do not think that is quite the test. When I was appointed Recorder of Oxford, I did not weigh up the chances of employment in Oxford; there is nothing I can do to warrant my staying nearer my work there, because if I go to stay in Oxford in order to work there as a recorder four times a year, I have to travel every day to London to exercise my profession as a barrister. It is anomalous and unjust that a recorder should come under Schedule E, whereas a barrister—and only barristers can be chosen as recorders—should come under Schedule D. One has the situation whereby the recorder-ship of a small place is worth perhaps £40 or £50—at Abingdon I think it is worth £80 or £90—but travelling there from London four times a year would cost more than the amount paid for the recorder-ship. Yet somebody on the circuit has to do the job; justice has to be administered. The result of the way in which these two rules work is that the person works at a loss.
Surely, the Solicitor-General must think, quite apart from Schedules E and D and Rules 3 and 9, that that is unjust. He did not answer that point; he did not say whether in his opinion it was unjust; all he said was that we could not change Rules 3 and 9 at this stage. This Bill modifies the application of Rules 3 and 9, and all we suggest in this Amendment is that in its modification it should iron out some of the injustices which at present exist under these rules. It will not apply to a person who travels from his home 1214 to his work purely and simply. It applies where a man travels from one place of business to another. That is the point. That is why the ambit of this Amendment is not as large as the Solicitor-General thought it was, and would not make such an inroad on the present administration of Rules 3 and 9 as he thinks.

§ Mr. I. J. Pitman (Bath)
I hope that some trade union Member opposite will be able to help us in this discussion, because this is analogous to an erector or a mason who might live at Godalming and go up daily to his work in London and be sent away to do a job of work in Torquay. As I see it, that person ought to be allowed not to regard those expenses as income. We are saying in this Amendment that we want the erector and the director to be allowed to travel from Godalming to Torquay without paying tax. As I understand it, the Solicitor-General says that if the person goes up to London first and then goes to Torquay there is no difficulty, but if he makes the shorter journey from Godalming to Torquay he is thereby rendering himself liable to tax. I see that the Financial Secretary is shaking his head. I should like to be put right on this because it seems to me to be a very important issue.

§ Sir Arnold Gridley (Stockport)
I must at once declare that I have a strong personal interest in this Amendment, as I am a director of various companies. I have endeavoured to follow the Solicitor-General's argument, but probably due to my own fault, I am still as fogged as I was before I heard his speech. There are co-directors of mine who have to come up to London from the places where they are ordinarily engaged, such as Gloucester and Birmingham. They are most valuable men whose attendance in London is absolutely essential, and whose services I should be very loath to dispense with. In exactly the same way my duties entail regular visits to something like seven or eight different works in various parts of the country. Hitherto I have charged the amounts to out-of-pocket expenses. I am not one of those directors who receive extravagant allowances, as has apparently been the case in the past with certain directors—extravagant allowances which the Treasury are now quite rightly seeking to prevent, or 1215 at any rate to tax, and which I hope the Treasury will succeed in preventing from being paid.
I want the matter to be made clear beyond peradventure, not only for my own sake but for the sake of hundreds of directors in the country, who, if I may say so with modesty, are also trying to do their utmost to further the exports of the country. It should be made perfectly clear what is our exact position. It should be made clear, if my colleagues have to come up to London, or if I have to visit various works each month, whether the expenses are a legitimate charge to the working expenses of the company, or whether they are to be treated as allowances to directors and subject to tax. I think this is going to be a very serious injustice and a very grave handicap to business. This new method which is being introduced for the first time is being introduced at a very unhappy moment in the industrial struggles of the country.

§ Mr. Selwyn Lloyd (Wirral)
We were discussing the other day the question of the Raw Cotton Commission. That Commission has a certain number of part-time members, and it was agreed that that was of substantial advantage to the Commission. The Commission normally meets in Liverpool, and a number of these part-time members live in Manchester and other places where they carry on their ordinary businesses. Are we to understand from this declaration that such persons are not entitled to charge their expenses? That is a matter that should be made quite clear.

§ Colonel J. R. H. Hutchison
I have always understood it to be a principle of Income Tax law that the individual lives at his place of work, and that if he chooses to live elsewhere, he does not get an allowance for the costs of travelling. But in the case we have in mind, the individual cannot live at his place of work because he has two or three places of work. How is it to be argued, therefore, that a person is not entitled to get the costs of going to an extraordinary place of work as compared with his ordinary place of work? It is that individual with whom we are concerned.

§ Mr. Assheton
May I, by leave of the House, speak again if there is to be no reply?

§ The Solicitor-General
Perhaps I can reply quite shortly to what has been said. The senior Burgess for Cambridge University (Mr. Pickthorn) thought it right to suggest that I was endeavouring to import prejudice because I used the phrase "highly-paid executive." really do not think he could have taken the trouble either to have read the Amendment or the Clauses we are discussing, because if he had taken the trouble to do either of those things, it would have been obvious why I used that expression, and what my argument was meant to be The Amendment reads: and for the purposes of this Part of this Act expenses of travelling between such place as a director or person employed in an employment to which this Part of this Act applies. In other words, it is designed to apply only to persons who are engaged in employment to which this Part of the Bill applies, and those are persons who are paid £2,000 a year and upwards. That is what I meant by "highly-paid executives," which does not seem to me to be a wholly incorrect description of persons who receive that amount of money. It is the hon. Member's own responsibility if he thinks it right to make such a remark without taking the trouble to read the Bill.

§ Mr. Pickthorn
rose—

§ The Solicitor-General
I am not going to give way. So long as one accepts that Schedule E stands as it does, there is no case for making an exception in the case of these persons, which is what the Amendment seeks to do. That is to say, if we alter Schedule E, we must alter it for all persons, and not only for those persons referred to in this Part of the Bill. I think that the right hon. Gentleman will agree with that, which is my answer to his Amendment. Therefore, the argument really is essentially against Schedule E as a whole, a question which has been constantly discussed; it was discussed earlier during the Committee stage, and the Financial Secretary discussed and explained the matter. Whether hon. Members are right or wrong, they cannot, in my submission, raise that argument on this Amendment which seeks only to make a partial exception. That 1217 was the burden of my argument which, if I did not make it plain earlier, I hope I have now made plain. Directors cannot charge expenses to which they are put in getting to board meetings, but if as directors they have to travel because they are directors, from one place to another, they can charge the expenses to which they are put in getting to those places. For these reasons, I hope the Committee will not agree to this Amendment.

§ Mr. Eccles
I beg to move, in page 27, line 23, at the end, to insert: (3) The Income Tax (Employments) Act, 1943, and the Income Tax (Offices and Employments) Act, 1944 (which provide that tax shall be deducted from certain emoluments by the persons paying them), shall not apply to any sum which, by virtue only of the provisions of this section, falls to be treated as a perquisite of the office or employment of any director or person employed in an employment to which this Part of this Act applies. When we were discussing this Clause in Committee my hon. and gallant Friend the Member for Holderness (Lieut.-Commander Braithwaite) and I attempted to get the Chancellor of the Exchequer to give us a clear statement whether or not the change in the methods of the determination of these expenses would bring any kind of disbursements so made within the provisions of P.A.Y.E. We were not at all satisfied with the answer the Chancellor of the Exchequer gave us, because the right hon. and learned Gentleman then seemed to think that the only point we had raised was whether or not, when the accountant of a business was reimbursing someone for some expenses he had incurred, a new calculation of his code number would have to take place. That was not the point at all. The point that we were trying to put to the Chancellor was the extraordinary administrative difficulties that will take place if any of these repayments of tax have to go under P.A.Y.E. arrangements.
Although any claims to be made by the directors or employees for repayment of taxes will not, in practice, be brought under current coding or will be dealt with by a separate claim, that money will only be paid back to them at the end of the year or even later. The point is best put by way of illustration. Is it a fact or is it not that a man, who spends £5 on giving 1218 an entertainment or clearing some expenses on behalf of his firm and then goes back to the firm's accountant and claims that £5, will, under these new provisions, have that expense treated as an emolument and, therefore, added to his income? If that should fall under the P.A.Y.E. system then the accountant is going to reimburse him with £5 less tax, and he must go and make a claim upon the Revenue to get the tax back when the expense has been admitted as a proper expense under the Bill.
We feel that that would not only be unfair but would cause an immense amount of unnecessary work. What we asked the Chancellor of the Exchequer on the Committee stage was whether in his opinion this Clause 37 brought those payments under the P.A.Y.E. system, to which the Chancellor gave us a very unsatisfactory and partial answer. Therefore, we put down this Amendment hoping that it will be unnecessary to press it, because it will be made clear in the reply to be made on behalf of the Government that all tax raised on these expense allowances, in cases where it should be raised, should be raised by way of assessment and not by way of deduction under P.A.Y.E. regulations.

§ Mr. Oliver Poole (Oswestry)
I beg to second the Amendment.
As my hon. Friend the Member for Chippenham (Mr. Eccles) said, the object of this Amendment is to clarify the position under P.A.Y.E. I certainly share his hope that it will not be necessary for us to press the Amendment after we hear the reply of the Solicitor-General. There are two different methods by which people receive payment for expenses. In certain cases there is a lump sum payment made to the directors or employees of certain firms for general expenses during the period of a year, and under the provisions of this Bill they will now be subject to tax and the expenses will be paid back under Schedule E. The principle of that will be accepted by everybody on all sides of the House.
7.45 p.m.
On the other hand, in a very much larger number of cases—and I would emphasise that—people travel around the country and in carrying out their business incur certain quite small expenses totalling perhaps £5 to £20. 1219 When they return to their offices they put an account into the accounts department which shows what was spent on railway fares, etc. They receive in cash the exact amount of money expended on expenses. When this was raised in Committee the example I put to the right hon. and learned Gentleman was that of a man engaged—I took this example because it came first to my mind—as a public works contractor in London or Birmingham with contracts in many towns or districts. It was essential that he should travel about from place to place. The reply that the Chancellor gave then was that that kind of expense, which was normal and in accordance with the general run of his business, would be taken care of under Section 41 of this Bill.
I accepted that because I felt quite sure that the Chancellor of the Exchequer meant to convey to me and to the Committee that that sort of expense was quite justifiable and he had no wish to be unfair about it. When we went into it more carefully, however, we found that there was nothing in the Bill to prevent P.A.Y.E. deductions being made from those payments. As my hon. Friend the Member for Chippenham said, if this system is carried through, a great amount of inconvenience and unnecessary work will be caused as well as hardship which will be unreasonable. I hope that the Solicitor-General will give us a reassuring answer in this case, and, if our Amendment cannot be accepted, that he will undertake that some other more suitable words will be put in the Bill.

§ The Solicitor-General
The Amendment raises the question as to how these expense remuneration figures—if I may so call them—will be treated for purposes of P.A.Y.E. The Amendment would seek to exclude them from the ambit of the P.A.Y.E. system. To a certain extent one has to apply a system to a new situation in such a way as to make it work most effectively and sensibly. May I first say how it works? The P.A.Y.E. regulations start off with requiring an employer to deduct taxes on all emoluments assessable to Income Tax under Schedule E. That is the basic situation with which one starts. Expense payments affected by Clause 37—the one we are discussing—will be emoluments, and, accordingly, they will automatically fall within the 1220 pay-as-you-earn scheme as the regulations stand and as at present they are worked.
In some cases it will be perfectly clear that if the payments were brought in as gross remuneration, as Clause 37 requires, they would be counterbalanced by an equivalent claim under Rule 9, under which the claim can be made for deduction of expenses incurred by the recipients. In cases where it is obvious the Clause provides for it, and the inspector will be able to notify the employer that the payments can be ignored. Where he does so, there will not be any question of deducting tax on those payments. In other cases, if the situation appears to be that the taxpayer is likely to be entitled to a deduction under Rule 9, an estimated figure for that allowance will be taken into account in arriving at his code number. There will be an estimate made, the object being to see that, as far as practicable, his proper tax will be deducted in the course of the year. At the end of the year when full particulars of the emoluments become available, the correct deduction for expenses will be made in arriving at the assessments. That is the ordinary case.
There are, however, certain classes of emoluments—for example, the free use of a car—which are very difficult to fit into what I have just said. Questions may arise as to how the P.A.Y.E. regulations would fit into the kind of benefits in kind with which Clause 38 deals. That Clause deals with benefits in kind which are made direct as part of the emoluments of the director or the executive. In the case of such a benefit—I have mentioned the use of a free motor car—deduction of tax, as such, will not be possible from the very nature of it, but, so far as possible, the value of the benefit will be taken into account in fixing the taxpayer's code number for the year, with the result that the tax on the salary and the assessable value of the benefit in kind together will be deducted from the salary. In other words, the best assessment will be made of the value of the use of the motor car, for example, and the appropriate figure will be included.
I would like to say what would happen if the Amendment were accepted. Suppose that these emoluments were excluded from the principle of the P.A.Y.E. regu- 1221 lations. For the purpose of my argument I would like to speak in terms of year 1—the year in which the emolument is enjoyed—year 2, and year 3. The House will then know what I mean. After the end of year 1—that is to say in year 2—an assessment would have to be made in respect of the emoluments enjoyed in year 1—am talking on the basis that the Amendment has been accepted—and there would be brought into charge for tax any part of the payments which could not be shown to be admissible as an expense under Rule 9 of Schedule E.
The tax on those amounts which could not be justified as an expense under Rule 9 of Schedule E would fall to be taken into account in fixing the code number for the next year—year 3—during which the emolument would rank for tax. The result would be that the tax on the emolument which was received in year 1 would not be collected until year 3. That is a situation which really is not justifiable. Provided the regulations can be so worked as to make an estimated deduction in order to fix with reasonable accuracy what the taxpayer's code number should be—and we feel that we can do it—there is no justification for the tax which is due in respect of an emolument enjoyed in year 1 not being collected by the Revenue until year 3. For those reasons we feel it would not be right to accept that Amendment.

§ Mr. O. Poole
Can the right hon. and learned Gentleman say why it can only be claimed back under P.A.Y.E.? It would seem to me much better if the tax were paid by cheque immediately at the end of year 1, when the inspector had disallowed the claim under Schedule E.

§ The Solicitor-General
An assessment has to be made upon it, and it would have to be included in the code number fixed for the next year—that is to say year 3.

§ Mr. Poole
Why cannot it be paid straightaway? Why has it to be collected back by means of P.A.Y.E.? Why cannot it be collected by immediate payment?

§ The Solicitor-General
It would not be received in year 1 even if we did that. There would have to be a separate assessment, which might mean a substantial payment by the director or the executive in year 2, which might be much less convenient to him than having it deducted 1222 pro rata monthly by P.A.Y.E. in year 3. If the hon. Gentleman's suggestion were adopted, a director or an executive might have to pay in year 2 by cheque a substantial sum of money in respect of an emolument which he had enjoyed in year 1. If one requires a method which would not impose on him the burden of making a substantial payment by cheque, it would have to be done by P.A.Y.E. in year 3.

§ Mr. Poole
indicated dissent.

§ The Solicitor-General
The hon. Gentleman shakes his head. Either it is paid by cheque, which would make it necessary to find a substantial sum in year 2, or it could be broken up so as to include it in his code number in year 3.

§ Mr. Assheton
I hope the right hon. and learned Gentleman will consult with his friends in the Board of Inland Revenue and think about this matter again. I cannot imagine anything more inconvenient both to the Inspector of Taxes and to the taxpayer than to adopt the plan which the right hon. and learned Gentleman has just put before us. I am sure the proposal made by my hon. Friend the Member for Oswestry (Mr. O. Poole) is much more likely to be agreeable to the Inspector of Taxes and to the taxpayer. A passion for uniformity has overwhelmed the right hon. and learned Gentleman. He wishes to get everything fitted into the planned P.A.Y.E. system. I suggest it would be wise on this occasion to think about it again and see whether, after further consideration, the Board of Inland Revenue could not give some different advice.

§ Mr. Pitman
The Solicitor-General ought to consider the terms of this Amendment and explain what his proposals are, because I do not see how anything that he is proposing can work. As I understand it, this Bill is likely to become an Act on Friday, and at the end of June a great number of accountants will be faced with this problem. A number of cases will arise, such as that of the highly remunerated commercial traveller who does very well on commission and whose travelling expenses can be very high.
As I understand the proposal of the Solicitor-General, it is that at the monthly 1223 deduction of tax under P.A.Y.E., the whole of the expenses, whether they are justified or not, will be regarded as income and chargeable to Income Tax at the full rate. It may well be that the man will be actually out of pocket for several months as a result, and will have nothing to live on during the time when the case is argued out, even when the secretary or the accountant of a company considers that it is an obvious case of allowable deduction, because the inspector has to decide in due course whether a deduction shall be allowed. I should like to know whether that is the proposal of the right hon. and learned Gentleman in lieu of the suggestion put forward by my hon. Friends the Members for Chippenham (Mr. Eccles) and Oswestry (Mr. O. Poole).
Their scheme has this great merit, that this Clause is limited to people who are drawing £2,000 a year and over, as was pointed out by the Solicitor-General to the senior Burgess for Cambridge University (Mr. Pickthorn). There is a publication which shows how many people there are in receipt of that sum or more. P.A.Y.E. is designed for the millions of weekly wage earners, whereas, under the old system of taxation, the amount due was paid by cheque, after assessment. That system worked very well while the number of taxpayers was relatively few. This new provision will affect relatively few cases. It will not affect millions of taxpayers. It is better procedure that Income Tax should be agreed later with the inspector of taxes, and the right amount then paid. It will cause great hardship if the Solicitor-General insists on a full deduction on all these expenses, and if there have to be reclaims of tax from the Inland Revenue, months later. As I understand it, that is what the present proposal means in practice.

§ Mr. Eccles
If I may say a few words again, with the leave of the House, I would like to tell the Solicitor-General that until tonight I did not understand why my hon. Friends on this side and I had had so many letters from businesses on this subject. Clause 37 and P.A.Y.E. have produced a larger crop of letters than any other Clause of the first 46 Clauses of the Bill. But now I see that the amount of work which will be put on businesses 1224 as a result of collecting tax in this way will be extraordinary. Imagine a man who has a motorcar—and a chauffeur—belonging to a company, and part of the time the car is used by his wife. A calculation as to the value of the car to the man in his proper business journeys, and the other part of expenses which could properly be attributable to his wife going shopping, has to be made. The part belonging to his wife has to be made subject to a calculation as to what the man's tax code number is to be next year.
The whole think is topsy-turvy. The only sensible thing to do is to calculate all this tax by assessment, and make the man pay directly he has been assessed. To try and bring it into P.A.Y.E. will cause headaches to thousands of people. It would not be right to press the Amendment, because I do not understand exactly what the Solicitor-General said and I think we ought to go away and think about the matter. If there is any way of preventing a business from having this extra burden put upon it, then something out to be done by administrative action to that end.