HC Deb 19 May 1952 vol 501 cc158-9

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Sir F. Soskice

This is a long and complicated Clause extending over some three pages. It appears to deal with cases of income received from sources overseas which is not taxed at source, and the object of the Clause appears to be to deal with the effect of the provisions as to taxation on the previous year's income and to prevent the taxpayer from having to pay more tax than the income which he receives, which is the effect of some of the present provisions of the tax code, as I understand them.

As the Clause is drawn, it appears to give two separate options to the taxpayer. One is to elect to be treated for tax purposes as if he sold his overseas investment after it had ceased to bear income for two years. The other option is apparently to keep it for six years without its paying any income and, if he exercises his option, to be treated as if he acquired it when it first begins to pay income again.

That is what the Clause appears to do. It seems to be a useful Clause. It has the effect of preventing an injustice which at present falls upon the taxpayer, namely, his having to pay tax in respect of one year in which he does not receive any income from his investment. However, the Committee is entitled to an explanation of the working of this Clause, and I hope that the hon. Gentleman will be so good as to give us some idea of its object and of how it works.

Mr. Maudling

This Clause has been put down in fulfilment of an undertaking given last year by the right hon. and learned Gentleman in response to an Amendment moved by the hon. Member for Barnet (Mr. Maudling). Therefore, it has a respectable parentage and its effect is exactly that described by the right hon. and learned Gentleman.

At present, in certain circumstances, where a person has investment income from which tax is not deducted at source, and if he continue to hold that source of income but it no longer provides him with that income—for example, if no dividend is paid—he will be taxed twice over because he is taxed on the basis of the receipts of the previous year.

This Clause provides that should he consequently dispose of the source of income after two years, he shall be able to treat it as if he had disposed of the source of income in the last year in which income arose from that source. Also we have gone further, and on grounds really of administrative convenience we have allowed the same option at the end of six years. If no income has arisen from that source at the end of that time, he can exercise that option, in which case, should income arise at a later date from that source, it will be treated as a new source of income. As the right hon. and learned Gentleman says, it is a useful provision of a slightly obscure nature. In view of that fact, and of its respectable parentage, I hope that he will be able to acquiesce in this Clause.

Clause ordered to stand part of the Bill.