Clause 17.—(ACQUISITION OF NEW SOURCES OF INCOME UNDER CASE III. IV OR V OF SCHEDULE D.) (Hansard, 7 June 1951)

§ Mr. Maudling
I beg to move, in page 10, line 42, at the end, to insert: Provided that if in any year no income arises from a particular source then that source may at the option of the person assessed exercised within six years be treated as having ceased, and when such option has been exercised and income from that source subsequently accrues such income shall be deemed to arise from a new source. This Amendment is concerned with a narrow point and rather a technical one for this hour of the morning, but I hope the Committee will bear with me while I try to explain the point underlying it. The Clause deals with income arising in Case III, IV and V of Schedule D from annuities, interest, income from overseas possessions and securities and from carrying on trade or professional vocation overseas. The purpose of the Clause is to reverse the judgment recently given in the Goodlass Wall case and to restore previous practice.
Under the Clause a taxpayer may, in certain circumstances, pay tax for four years on income he receives for only three years. When income arises from a new source under Case III, IV and V, a taxpayer is assessed in the year in which the 1576 new source of income arises and thereafter is taxed year after year on the income of the preceding year. It follows that if a taxpayer had an income of £100 a year for three years from a source of this kind he would be taxed in the first year on the actual receipt of £100, in the second year and third year on the receipts of the preceding year, again £100, and in the fourth year, though he received no income from that source, he would still have tax levied because he would be paying on the basis of the preceding year's income.
The purpose of the Amendment is to give the taxpayer, if the income from such a source has fallen off or ceased altogether, the power to elect, within the period of six years, to be taxed for the last year on his actual receipts. In that way the difficulty under the present Clause of tax having to be paid for four years on three years' income would be obviated. I think that there is a strong case in justice for this Amendment. Although I can well understand that the drafting may not be perfect, I hope that the Attorney-General will look upon the Amendment with favour.

§ The Attorney-General
The hon. Member for Barnet (Mr. Maudling) has explained its object and the object of 1577 the Clause. The object of the Amendment, to put it shortly, is to prevent a person being taxed in respect of four years when he had received only three years' income. The object of the Clause is to prevent a person being taxed for only two years when he had received three years' income. In a sense, both Clause and Amendment are complementary. May I say at once we think there is force in the arguments of the hon. Gentleman. Just as the Clause is necessary, so we think the Amendment is necessary. However, there are certain criticisms of drafting and of the scope and form of the Amendment, which I would desire to amend. The Amendment deals only with cases within the Clause, which applies only in cases where individuals already have sources of income under Case III, IV and V and have acquired an additional source. The Amendment ought not to be limited only to those cases. It should be of general application.
The result of that, if I am right so far, is that the Amendment raises rather wider issues. As I have already intimated, I accept its purpose and the principle upon which it is drafted, and I suggest that it should be much wider in scope. I also suggest that it is a matter for consideration whether the option should be exercisable if only one year's income is missed, and that it would probably be right that it should be exercisable only if a series of years' income is missed.
In those circumstances I hope the hon. Gentleman will be so good as to ask leave to withdraw his Amendment upon the assurance that we will study the problem and work out an Amendment which will meet the points of criticism which I have ventured to make, and which I hope the Committee will think are well founded. I cannot promise that we shall be able to put down that Amendment on the Report stage because it involves wider issues and will need a certain amount of prolonged study, but we will undertake that an Amendment will be put down, if not then, which I hope and believe will meet the point which the hon. Gentleman has in mind.

§ Mr. Maudling
The right hon. and learned Gentleman has been most generous in offering to go even beyond the small suggestion I made, and in those 1578 circumstances I beg to ask leave to withdraw the Amendment.