HC Deb 03 July 1950 vol 477 cc47-51

(1) The provisions of this section shall have effect where the Commissioners of Inland Revenue are satisfied as respects any tax carrying interest under section eight of the Finance (No. 2) Act, 1947,—

  1. (a) that the tax is in respect of profits or income arising in a country outside the United Kingdom; and
  2. (b) that, as the result of action of the government of that country, it is impossible for the profits or income to be remitted to the United Kingdom; and
  3. (c) that having regard to the matters aforesaid and to all the other circumstances of the case it is reasonable that the tax should for the time being remain uncollected,
and the Commissioners allow the tax to remain uncollected accordingly.

(2) Interest of the said tax shall, subject to the provisions of subsection (3) of this section, cease to run under the said section eight as from the date on which the Commissioners of Inland Revenue were first in possession of the information necessary to enable them to be satisfied as aforesaid, and, if the said date is not later than three months from the time when the tax became due and payable, the interest thereon under the said section eight in respect of the period before the said date shall be remitted.

(3) Where, under subsection (2) of this section, interest has ceased to run on any tax and thereafter demand is made by the collector or other proper officer for payment of all or any of that tax, interest under the said section eight shall again begin to run from the date of the demand in respect of the amount demanded:

Provided that where all or any part of the amount demanded is paid not later than three months from the date of the demand, the interest under the said section eight on the amount so paid running from the date of the demand shall be remitted.

(4) This section shall apply in relation to all assessments made whether before or after the passing of this Act and, in relation to any assessment made before the passing of this Act, shall be deemed always to have had effect:

Provided that no sum actually paid before the twenty-seventh day of June, nineteen hundred and fifty, in respect of any interest shall be repaid by virtue of the provisions of this section.—[The Solicitor-General.]

Brought up and read the First time.

The Solicitor-General

I beg to move, "That the Clause be read a Second time."

This new Clause is designed to carry out an undertaking which I gave when a previous Clause was being discussed. That Clause, which had been put down by hon. Members opposite, proposed that no interest charge should be made on tax on foreign income which was frozen. I deployed various reasons which seemed to us to make it impracticable to accept that proposal, and I offered to put down a Clause on the Report stage which would have the effect of providing that if the Commissioners did not, according to their ordinary practice, call for payment of the tax on the frozen income, interest should not run upon that tax so long as they did not call for it to be paid.

4.0 p.m.

This Clause implements that undertaking. If the Commissioners, when they make assessments in respect of foreign income, find the foreign income is frozen and they are satisfied that it would mean a hardship upon the taxpayer to call upon him to pay tax upon that foreign income, they then allow the tax normally to stand over. As the law stands at present, notwithstanding that they may, in the exercise of their discretion, allow payment of the tax to stand over, it is, nevertheless, obligatory to charge interest upon that tax, because the 1947 Act so provides by Section 8.

What this new Clause does is to say that when the Commissioners decide not to require payment of tax, but allow it to stand over, the interest charged shall not run. That implements the offer which I made during our previous discussion. It was then thought inadequate, and the Committee proceeded to discuss a Clause put down to provide that the interest charge should not arise, in any circumstances, on foreign frozen income. The Committee voted on that Clause and decided to reject it. I have put down this Clause, which goes part of the way to meet the difficulties hon. Members had in mind. It does not go all the way, but it goes as far as we feel it is practicable to go. For those reasons, I hope the House will feel it should be added to the Bill.

Mr. Manningham-Buller

By this new Clause the right hon. and learned Gentleman has completely implemented the undertaking or offer, whichever is the correct description, which he made on the Committee stage. Indeed, it is doing no more than correcting to some degree some of the hardship and injustice created by the 1947 Act, for which hon. Gentlemen opposite are, of course, responsible. We welcome this Clause, to the extent it goes. It does not meet, of course, the case put forward so very strongly and persuasively by my hon. Friend the Member for Barnet (Mr. Maudling) in Committee. I apprehend that if I proceed to discuss the respects in which it does not meet that case I shall have your eye upon me, Sir Charles. Possibly, I should be called to order if I decide to reveal the reasons we advanced on that occasion for a wider Clause.

It is still the position, unfortunately, that despite the new Clause persons who-earn income overseas and find that that income is blocked, will remain liable to tax upon that money and will have to pay interest, in many cases, on tax which they cannot remit to this country without breaking the law of a foreign country or a country overseas. That still appears to-us a very considerable hardship, but this Clause may go a little way to alleviate the situation, in some cases; and, to the extent that it does that, we welcome it.

Lieut.-Commander Gurney Braithwaite (Bristol, North-West)

Upon the Report stage of a Finance Bill we generally find ourselves in a situation in which a number of half loaves pass across the table as being preferable to no bread. As the right hon. and learned Gentleman said, quite properly, a few minutes ago, he came part of the way to meet us and as far as practicable. I hope this matter will be considered again before another Budget is presented, from whatever section of the House it may come. This is something which might have been completely cleaned up without any serious loss to the Revenue or administrative difficulties. My hon. and learned Friend the Member for Northants, South (Mr. Manningham-Buller) pointed out the injustice which remains. Here is income. which cannot be drawn but upon which interest on Income Tax has to be paid if one is in arrears.

There is another objection to the course taken in not meeting us completely in this matter. It is that we are living in an age when there are exchange fluctuations, devaluation and sometimes revaluations and alterations of exchange values. What assurance can the Government give us that in these cases, when the thaw sets in and the money becomes unfrozen, the interest charge on Income. Tax derived from money which has not been passed to this country, will prove in fact to have been excessive when tax income is eventually paid in devalued currency. This is a point to which the Government should pay attention.

Mr. Maudling (Barnet)

I am sorry that the Government cannot go the whole way. They are giving the Commissioners discretion to waive payment of interest in cases where they deem that hardship exists. I hope that that discretion will be used as widely and as generously as possible. To be asked to pay tax on money one cannot receive or use is, in any event, inevitably a hardship.

Mr. Selwyn Lloyd (Wirral)

Arising out of what my hon. Friend the Member for Barnet (Mr. Maudling) has just said, I hope that subsection (2) will be administered leniently. A time limit is set out there. It seems there may be circumstances in which the subsection might involve hardship. I hope that that will be taken into account.

The Chancellor of the Exchequer (Sir Stafford Cripps) indicated assent.

Question put, and agreed to.

Clause read a Second time, and added to the Bill.