HC Deb 07 June 1956 vol 553 cc1470-3

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

Mr. John Edwards (Brighouse and Spenborough)

This Clause is not very clear to us. We have had no explanation at any time, except in a few words by the Chancellor during the Second Reading of the Bill. If the Financial Secretary would say a few words about the effect of the Clause we should be grateful.

1.0 a.m.

Mr. H. Brooke

I willingly respond to that invitation, though I hope that at this hour I shall not be asked to explain every subsection in detail. The purpose of the Clause is to enable relief from tax to be given in certain cases where income from sources outside the United Kingdom, which is chargeable to tax on the basis of the amounts remitted to this country, could not for some reason be remitted in the years to which it related.

Hon. Members may recollect that this matter arose about 18 months ago and my right hon. Friend the Lord Privy Seal, then Chancellor of the Exchequer, said that he would seek Parliamentary approval to adjust the tax liability in certain cases. Those were the cases of former German civil servants now living in the United Kingdom, many of whom were entitled to a German pension which however, was for obvious reasons not remitted to them from year to year.

Indeed, it was not until the Federal German Republic passed a law in, I think, March, 1952, that these former German civil servants, living by that time outside Germany, who had been dismissed by the Nazis because of politics, race or religion, were enabled to claim from the present West German Government a pension based on the position they would have reached in the German Civil Service had they not been dismissed.

That meant that there were heaped-up arrears of pension to be paid to them. It would be most unfair in that or similar cases if the whole liability for tax fell in the year when the pension was received. In a conceivable case it might render a man liable to Surtax although his normal income, including pension, was far below that level. It seemed altogether right that these people should not suffer that extremely bad luck, and we have drawn the Clause in terms which cover not only that particular and rather striking case, but all cases of foreign income which is assessable on the remittance basis where the tax liability is increased by the heaping up, so to speak, of remittances through causes which were outside the taxpayer's control.

The main effect of the Clause will be on income from certain foreign employments and pensions. In a few cases it may apply to foreign investment income, but the main purpose of the Clause is to safeguard the people who are in this position from the rather severe effect of British tax if it were to fall entirely on the heaped-up arrears which are remitted to them in a single year.

Mr. Edwards

Am I right in supposing that the effect of the last sentence of the Clause is that any income actually remitted in any year from 1951–52 onwards can still be the subject of claim, so that we are, in fact, going back to the Income Tax year 1951–52 in respect of moneys remitted then or since then?

Mr. Brooke

Yes. The right hon. Gentleman is referring, I think, to subsection (11). That provides that a claim under the Clause can be made in respect of income received here in the year 1951–52 or any subsequent year". This will cover all cases of heaped-up remittances, so to speak, which are known to us. I think that it should cover everything. If the right hon. Gentleman has a case known to him which would not be covered, perhaps he would let me know. Needless to say, the Inland Revenue has accumulated a good deal of information about this. It becomes obvious in a taxpayer's return. We think that by making it possible to claim as far back as 1951–52 we shall entirely remove this potential injustice.

Mr. H. Wilson.

We are very grateful to the right hon. Gentleman for the patient, courteous way in which he has explained this very complicated Clause. I think that the Chancellor and the Patronage Secretary and the Lord Privy Seal, whom we are glad to welcome to the proceedings at this stage will recognise that it is a very long time since so long and complicated a Clause in the Finance Bill went through this Committee so quickly. I do not think that such a thing happened at all during the time the Lord Privy Seal was Chancellor of the Exchequer.

The reason why I think we should particularly welcome the Clause is that it fulfils an undertaking, as the Financial Secretary said, which was given by the Lord Privy Seal as long ago as November, 1954. I think that the Committee will recall the circumstances in which that pledge was given. It was given in reply to a Question by the hon. and gallant Member for Knutsford (Lieutenant-Colonel Bromley-Davenport); and we are sorry that he is not here to share in this triumph.

When the pledge was given by the Lord Privy Seal he undertook most solemnly—in November, 1954—that this matter would be put right in the next Budget. He failed to do it in the Budget of April, 1955, for reasons which, perhaps, we can appreciate, and it was not in the autumn Budget, for reasons which we cannot understand. It is a very good thing it is being done now, and no one will welcome more than the Lord Privy Seal that the present Chancellor should now, three Budgets later, give effect to what the then Chancellor promised would be done in the Budget next after November, 1954. We are very grateful to the Financial Secretary for explaining it so clearly to us.

I hope that when this Clause has been agreed we shall hear from the Chancellor, and I hope his words will be about reporting Progress. We really have been very speedy in helping him with this Clause. Clause 10 was probably badly drafted, because he had to accept an Amendment to it. No one in the Committee knows where he stands in relation to Clause 9, because, so that we could agree to it, the Chancellor had to take half of it back for further consideration. I hope that when we have agreed to this Clause we shall hear from the Chancellor what the News of the World would call "a certain proposition."

Question put and agreed to.

Clause ordered to stand part of the Bill.

Mr. H. Macmillan

I beg to move, That the Chairman do report Progress and ask leave to sit again.

I would thank the whole Committee, and not least the right hon. Gentleman, for the help given in securing that these debates have been wide enough to cover the topics as they ought to have been covered and yet conducted with speed, and certainly with great good humour. We have made, very reasonable progress, and I think that now we may hope to take up our work again on another day.

Question put and agreed to.

Committee report Progress; to sit again upon Monday next.