HC Deb 10 April 1956 vol 551 cc20-1
38. Mr. G. M. Thomson

asked the Chancellor of the Exchequer if he will take steps to prevent seven-year covenants being used by parents to obtain Income Tax relief on the cost of their children's school fees.

Mr. H. Macmillan

The Income Tax Acts provide that a parent shall not be given relief from tax on payments which he makes under deed of covenant or otherwise for the benefit of a child who is under 21 and unmarried, if they exceed £5 a year in the aggregate. This applies to payments made to meet school fees just as it does to payments made for other purposes.

Mr. Thomson

In view of the importance of extending equality of opportunity amongst our children, would the Chancellor not agree that it is quite wrong to encourage what amounts to tax evasion among parents who wish to buy a privileged education for their children?

Mr. Macmillan

I am afraid that I do not understand the point of that supplementary question. I was asked what the law was and I stated it. I do not know whether the hon. Gentleman approves or disapproves of it.

Mr. Vane

In view of the value of education to the country as a whole, as well as to individual children, will my right hon. Friend consider amending the law to enable parents to do the best they can for their children?

Mr. Macmillan

That is another question. I was merely asked what the law was.

Mr. H. Wilson

Even though it is the case that parents cannot undertake covenants for their children, is the right hon. Gentleman not aware that there is a large amount of tax avoidance through this kind of covenant, under which uncles can take out these covenants for nephews and, in return, their children are beneficiaries of covenants taken out by the parents of the children helped?

Mr. Macmillan

No, Sir. Agreements of that kind would not be possible under the law. If one has such a kind uncle that he will look after one that is one thing, but a mutual arrangement would be out of order.

Mr. Wilson

Is the Chancellor not aware that the provisions of the Income Tax Acts, Finance Acts and so on dealing with this subject relate only to the case in which the Inland Revenue Department can establish an undertaking or agreement between the parties concerned; and these things, as we know in other directions, are done without any written or oral understanding?

Mr. Macmillan

If I may say so, that is not a very strong point. Obviously the law can be applied by the Inland Revenue Department only where it is aware that the law has been broken.

Sir F. Medlicott

Is my right hon. Friend not aware that Income Tax and Surtax payers already contribute considerably to the cost of educating other people's children?