HC Deb 18 April 1950 vol 474 cc69-71

Now before I come to my final proposals and summing up, based upon the considerations I have just put before the Committee, there are a number of lesser, but sufficiently important, matters that I ought to mention, in some of which adjustment of taxation requires to be made for reasons other than revenue purposes.

Two years ago I referred in my Budget speech to the growing avoidance of tax by means of arrangements known as restrictive covenants, amongst others. The form taken by these is that a high executive—it is almost always a high executive —undertakes not to set up in competition with the concern he serves or to serve its competitors. In return, the concern gives him a large sum of money or block of shares which, as the law stands, is not liable to tax. I gave a warning in 1948 that I should not hesitate to introduce retrospective legislation to tax such payments if it became necessary.

Since then certain glaring instances of such payments have been widely advertised, and I am certain that the public, and particularly those employed in the businesses concerned, do not think it right that a particular individual should by such a device be able to evade paying his proper share of taxation. The payment of such sums is, too, entirely contrary to the spirit of the policy of the White Paper on Personal Incomes, Costs and Prices, and can only help to break down the otherwise good record of voluntary restraint that has so far been shown in these matters.

I propose, therefore, that these benefits shall be made chargeable to Surtax and that the charge shall be restrospective to the year 1949–50 so that payment will have to be made next January on such benefits.

Mr. Oliver Stanley (Bristol, West)

Surtax only?

Sir S. Cripps

Surtax only. In the case of the larger sums this means that over 95 per cent. of them will be payable as tax. The warning I gave in 1948 applied to other devices besides the one I am now proposing to deal with, and that warning still stands in its full force; I hope that my present proposal will make that clear.

I have recently had under consideration the Income Tax treatment of superannuation and pension schemes for the benefit of employees on retirement. This is a highly technical subject and I believe that those who are familiar with it will all agree that in a number of respects the present law is unsatisfactory and anomalous. There is a clear need for inquiry into this problem; but there is an allied problem which should, I think, be examined at the same time: that is, the position of those who do not, or cannot, enjoy the same Income Tax advantages as those within such schemes.

A number of professional bodies have, for instance, made representations to me as to the position of their members. And much the same questions arise as to the individual trader or self-employed persons in general and, indeed, the individual employee who does not belong to a superannuation fund. There is certainly a case for inquiry here, and it would be necessary to bring within such review the present relief for payment of life insurance premiums.

I have, therefore, decided that this survey should be undertaken by a committee of standing similar to that now sitting under the chairmanship of Mr. Millard Tucker. The committee will be asked to review the more technical matters to which I have referred as well as to consider the wider question of the proper scope of Income Tax relief in relation to saving for old age or retirement or to provide for widows and other dependants after death. I am glad to say that Mr. Millard Tucker has accepted my request that he should act as chairman of this new committee as well.

There are a number of other minor matters which will be dealt with in the Finance Bill on the Inland Revenue side. As already announced, legislation will be introduced dealing with the treatment for taxation purposes of recoveries of enemy debts. There will be provisions dealing with certain methods of avoiding Death Duties, and with some technical points arising on the taxation of the income of married couples. The taxation treatment of certain wayleaves will be clarified and provision will be made for the superannuation contributions of Northern Ireland civil servants to be treated in the same way as in Great Britain. There will also be two matters which will be of assistance to industry: first, a measure of relief from tax for industrial research associations; and second, a provision extending for a further and final five years the period, expiring in 1950–51, for which, as a transitional measure, the Income Tax Act, 1945, permits the mills, factories, etc., allowances to be continued.