HC Deb 10 July 1956 vol 556 cc300-5

(1) In determining for the purposes of the exemptions from tax conferred on registered friendly societies and registered trade unions by section four hundred and forty of the Income Tax Act, 1952, whether any such society or union is by Act of Parliament or by its rules precluded from assuring to any person a sum exceeding one hundred and four pounds a year by way of annuity, there shall be disregarded any annuities under contracts approved by the Commissioners of Inland Revenue under section twenty of this Act, being annuities payable wholly in return for premiums or other consideration paid by a person who (when the premiums or other consideration are or is payable) is, or would but for an insufficiency of profits or gains be, chargeable to tax in respect of relevant earnings (as defined in the said section twenty) from a trade, profession, vocation, office or employment carried on or held by him.

(2) If, in the event of a dissolution of any such society or union, any such annuity as aforesaid ceases to be paid, or any contract for the payment of such an annuity fails in whole or in part, no payment shall be made in respect thereof out of the funds of the society or union to the annuitant or other person entitled to the benefit of the contract, but any sum which, but for this provision, would have been paid to him shall be applied in purchasing for the benefit of the annuitant an annuity (for the like term, and subject to the like conditions against surrender, commutation or assignment) from a person lawfully carrying on in the United Kingdom a business of granting annuities on human life.

(3) In the proviso to paragraph (1) of section eight and in subsection (1) of section forty-one of the Friendly Societies Act, 1896 (which restrict the benefits payable by a registered friendly society or branch by way of annuity), the word "annuity" shall be taken not to include any such annuities as are referred to in subsection (1) of this section; and, subject to the following subsection, where at the time when this section comes into force the rules of any registered friendly society or branch permit the society or branch to assure an annuity of one hundred and four pounds a year, the rules may within six months from that time be amended by resolution of the committee of management so as to permit the society or branch to assure additional amounts under such contracts as are so referred to.

(4) No amendment of the rules of a society or branch which is made by virtue of the last foregoing subsection shall extend to contracts entered into more than a year after the date when the amendment is registered under the Friendly Societies Act, 1896; and no such amendment shall be so registered unless the registrar to whom it is sent for registration is satisfied that the amendment (in addition to complying with the other conditions of this section)—

  1. (a) could not, within the six months beginning with the date when this section comes into force, have been made in the manner authorised by the rules of the society or branch, or not without summoning a special meeting of the society or branch; and
  2. (b) has been certified by any such actuary as is mentioned in section sixteen of the Friendly Societies Act, 1896, to be free from objection on actuarial grounds.—[Mr. H. Macmillan.]

Brought up, and read the First time.

Mr. H. Macmillan

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

The purpose of the Clause is to enable registered friendly societies and trade unions to assure to their members retirement annuities of more than £104 per annum under contracts approved by the Commissioners of Inland Revenue under Clause 20. The point about friendly societies was drawn to my attention by my hon. Friend the Member for Southend, East (Mr. McAdden), who withdrew an Amendment on an undertaking that we would try to meet the point. The present law exempts from Income Tax the funds of registered friendly societies and the provident funds of trade unions on condition that they do not assure an annuity exceeding £104 or any gross sum exceeding £500. These limits are a condition of registration for friendly societies. They are part of the basis of their system and not merely conditions of tax exemption.

Under Clause 22, assurance companies are to be exempt from tax in respect of funds referable to retirement annuities of the self-employed and under the conditions which we have just been discussing. There is, therefore, no reason that we can see in logic or equity why registered societies and trade unions should not be allowed to provide similar annuities to their members with this exemption. Subsection (1) of the new Clause makes the necessary amendment to the Income Tax Act, 1952, and the following subsections deal with points which may arise.

Subsection (2) deals with what happens in the event of the dissolution of a society or a union. Subsection (3) allows the committee of a society or trade union to make an amendment of the rules without waiting for the annual meeting or having to summon an expensive special meeting. This is a convenience which would help them. I commend the Clause to the House, because I think it equitable that these organisations should have the same position as insurance companies under the new schemes.

Mr. J. T. Price

I rise only because on an earlier Clause I felt constrained to speak rather critically of the Chancellor's proposal and therefore on this Clause am even more pleased than I should otherwise be to be able to thank the Chancellor for bringing this proposal forward, particularly as it links the trade unions with the friendly societies. In handing over this small bouquet to the Chancellor, I should like to mention that the trade unions, alongside the friendly societies, have for many years administered provident benfits to the members of those organisations, generally in a very efficient and satisfactory manner. A stage has been reached in our social development when I should imagine that many of the trade unions, with the technical equipment and the highly efficient organisations which they have built up, will find it worthwhile at least considering whether or not they should enter this new sphere of providing benefits for those members who have not been otherwise given pension rights in their conditions of employment in various industries.

It would not be out of place, perhaps, in any reference to the wider matters if I said that I think this House would probably deplore any development, either in friendly societies or in trade union adminitration, which meant their going into the annuity business, a highly technical matter, without proper actuarial advice. I hope there will be no repetition of the kind of experience which some organisations have suffered in years gone by, of schemes being put forward with high hopes but without the necessary technical advice behind them.

With those remarks, I thank the Chancellor for bringing the trade unions and the friendly societies into line with the facilities now open to the insurance offices. I hope the scheme will be administered not only with a view to the sectional interests of any of these organisations but to the wider interests of the social welfare of the citizens of this country.

8.30 p.m.

Mr. Stephen McAdden (Southend, East)

If I am brief in expressing my thanks to the Chancellor for the ample way in which he has met the representations I made on this matter during the Committee stage of the Bill, it is only because I realise that the best thanks we can afford the Minister on this Measure is to assist him to get the Finance Bill through with the greatest possible speed.

My thanks are none the less sincere because the Chancellor has done the most enlightened thing in this matter. He has gone as far as he could to meet the wishes of the friendly societies, he has shown that he believes they have a just and proved case, and he has gone all the way to ensure that they are able to compete upon equal terms with the large companies in this new method of saving, upon which my right hon. Friend himself has embarked, and upon which I am sure all hon. Members wish him every success. I thank him sincerely for what he has done in this matter.

Mr. Mitchison

On this side of the Committee we welcome, as we welcomed at an earlier stage, the concession made to the friendly societies. I should like to take a small coal of fire and deposit it upon the devoted head of the Chancellor by reminding the right hon. Gentleman that it was I who pointed out that the right hon. Gentleman had forgotten the trade unions, and the coal of fire is now to thank him for having ransacked his memory to discover somewhere in the depths of it some recollection that such institutions exist. The friendly society activities—if I may so describe them—of trade unions for these purposes are very close to those of the friendly societies. They are actually in the same Section of the 1952 Act. The right hon. Gentleman must have stopped reading it a little too early; but the Income Act is rather tedious reading. At any rate, I am glad that they have been included.

I make one other comment which, I hope, will be corrected if I am wrong. I have been looking at the time provisions in subsection (4). They restrict the period during which the rules of a society or branch may be amended, "by virtue of the last foregoing subsection"—that is, by virtue of subsection (3). There is another similar restriction under paragraph (a) of that subsection.

I gathered from what the right hon. Gentleman said that the object of those time provisions was simply to limit the operation of Amendments made under the special facilities given under subsection (3); that is to say, otherwise than in ordinary accord with the rules of the registered friendly society or branch; and that therefore the time provisions relate only to cases where the Amendments have been made by the committee of management itself. If that is so, that seems to be a thoroughly reasonable provision, and I suppose it will impose on the society or branch the practical duty of taking up the matter again at the next regular opportunity and repeating what was done by the committee of management the first time.

Mr. H. Macmillan

indicated assent.

Mr. Mitchison

I am glad to see the right hon. Gentleman nodding. We had the following Amendments down to this new Clause—in line 33, leave out from "shall" to "registered" in line 34 and insert "be"; in line 35, leave out from "1896" to "unless", and in line 38, leave out paragraph (a). They have not been called, and I shall not refer to them in detail. We put them down because we were not certain about that point, and I am glad to hear that all is well.

I make one more short comment. I believe that there have been alterations in this limit before, although I speak from memory. I appreciate that the time has arrived for an increase. What has been done here—I am sure it will reassure hon. Gentlemen opposite—is in this case at any rate to take off the limit altogether. The sky is the limit this time. Icaros, was it not, who flew up there rather too rashly and got into trouble? My right hon. Friend was right in saying, "Now that you are no longer restrained within the limit of £104 annuity, do not fly too quickly lest you fly into the sun." All that is true but, after all, times have changed and certainly the trade unions concerned in this matter, and I believe, too, the friendly societies concerned in it, may under modern, conditions, and with no horrible shortage of actuaries and accountants, be relied upon to set their own limits in the light of prudence rather than in the light of Acts of Parliament. Therefore my hon. Friends and I welcome this Clause.

Clause read a Second time and added to the Bill.