§ Sir Hugh Lucas-Tooth (Hendon, South)
I beg to move, in page 30, line 22, after "individual", to insert:or the widow or widower of an individual".623 This Amendment should be discussed with the Amendment in line 26, after "he", to insert:or in the case of a widow or widower her or his deceased spouse".These Amendments seek to give the widow of an individual who becomes liable for tax under Clause 31 the benefit of earned income allowance after her husband's death, with similar provisions for a widower. If an employer pays a pension to the widow of a deceased employee, that pension is treated as earned income. That is not done on principle but by special statutory provision. No such provision was made in favour of the widows of self-employed people. I do not know what the reason was. I imagine that it was partly technical, because there was no employer, and partly also, no doubt, because of the somewhat advantageous position of the self-employed person which is being corrected by Clause 31. But now that the law is being altered by Clause 31, it seems fair to consider all the supplementary provisions which follow from it.
Subsection (1) of Clause 32 gives the individual earned income allowance on any royalties or other payments received after his retirement, no doubt because such payments are analogous to a pension which would be eligible for earned income relief if he received a pension. It seems to me to be illogical and unfair not to make the parallel complete by giving similar relief to the widow after the taxpayer's death. That is the purpose of these Amendments.
§ Sir E. Boyle
My hon. Friend has raised quite an important point which we certainly considered when deciding what the final form of the Clause should be. I listened with attention to my hon. Friend, but I am not quite satisfied that the analogy with the pension really holds, because surely the pension which continues in favour of a widow after the pensioner's death really is a pretty special case in our national life. A pension is not, in the normal sense of the word, income derived from property. Furthermore, the destination of continuing pension benefit will have been laid down by the very terms of the pension scheme itself, whereas copyrights, with which we are dealing in the Clause, are assets like any other form of property which can give rise to a regular investment income.
624 Whereas the ultimate destination of a continuing pension is something laid down in the pension scheme itself, the author can bequeath a copyright, like any other asset, just as he pleases. If the copyright goes to the widow, she receives it as property. The royalty income which it produces, I should have thought, lacks the character of earned income in such event. It is like leaving any other piece of property.
We have considered this point, but, in my view, to say that we should go as far as this Amendment and as far as my hon. Friend has gone would be unwise in view of the general purposes of this Clause. I think that we must take the line in relation to the Clause that earned income relief is, in general, confined to income from a source which yields income as a direct result of the personal exertion of the person receiving the income. Just how great the personal exertion may be in each case is a matter of argument. It is a general principle and we are bound to stand on it.
Once the source of earned income has come to a end, then that consideration does not any longer arise, and it would not be possible to accept the Amendment without introducing a principle which, I think, would be rather far reaching and which I believe we should be in error in accepting. That is why, while I see the force of my hon. Friend's appeal, I do not think that I can advise the House to accept the Amendment.
§ Sir H. Lucas-Tooth
While I fully appreciate the force of my hon. Friend's argument, it still seems to me that the widow of a self-employed person is at a disadvantage in comparison with the widow of an employed person. I do not wish to press the Amendment, because I appreciate the force of the argument against it, but I hope that my hon. Friend, in considering it, will "well do it" between now and the next Finance Bill. He may consider that it may be possible to do something on behalf of these widows. In the circumstances, I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 11.45 p.m.
§ Sir E. Boyle
I beg to move, in page 30, line 28, at end to insert:(2) Where any sum or sums chargeable to tax by virtue of the said section thirty-one 625 are received, in any year of assessment beginning not later than six years after the discontinuance of the trade, profession or vocation, by the person by whom it was carried on before the discontinuance, that person may, by notice in writing sent to the surveyor within twelve months after the end of that year of assessment, elect that the tax chargeable by virtue of that section shall, in lieu of being charged for that year of assessment, be charged for the year in which the discontinuance took place; and in any such case an additional assessment shall (notwithstanding anything in section forty-seven of the Act of 1952) be made upon him for the last-mentioned year in the amount on which he is chargeable under the said section thirty-one in respect of that sum or in respect of all those sums, as the case may be, and in connection with that assessment no further deduction or relief shall be made or given in respect of any loss or allowance deducted in pursuance of subsection (4) of the said section thirty-one.This is a long Amendment but a relatively short point. It simply introduces a new subsection to Clause 32 in order to give a taxpayer, who gets in post-cessation receipts of his business in a year beginning not later than six years after its discontinuance, the option to be charged by way of additional assessment for the last year of business instead of for the year in which he gets the receipts.
This suggestion has been made to us by the Institute of Chartered Accountants. The cases in which the suggested option would operate are likely to be pretty rare. It seems to my right hon. Friend, in view of the representations made, that this suggestion is a perfectly reasonable one. The rather complicated wording of this Amendment is due to the working-out of the scheme behind it which I have indicated to the House.
§ Mr. Millan
I have one small point to raise. It is in connection with the words which appear at the end of this Amendment, which says:… no further deduction or relief shall be made or given in respect of any loss or allowance deducted in pursuance of subsection (4) of the said section thirty-one.In subsection (4) of Clause 31 we find that "loss" comes under subparagraph (a) and "allowance" comes under subparagraph (b). There are also mentioned the words "expense or debit". I would have thought that this Amendment would say that no further deductions or relief would be given in respect of "any loss, debit, expense or allowance." Is there a reason why the 626 Amendment refers only to "loss or allowance" and does not include "expense or debit"? It is not clear why there should be a distinction here.
§ Mr. Diamond
It would be churlish of me not to say how much we appreciate that the Government have shown their willingness to receive representations from the Institute of Chartered Accountants. If the Institute—as it may—renews its representations that cases I and II of Schedule D should be treated on a current year basis for companies instead of a previous year basis, are the Government likely to lend a sympathetic ear?
§ Sir H. d'Avigdor-Goldsmid
The theory, if it existed, that only chartered accountants can get Amendments accepted would be wrong, but in thanking my hon. Friend for this Amendment, which gives an option to the taxpayers—it is not often we can do that in this Chamber—may I draw his attention to the fact that this point was raised first on the Committee stage by my hon. Friend the Member for Wolverhampton South-West (Mr. Powell). His point has, to some extent, been met here.
§ Sir E. Boyle
Having taken advice, I can assure the hon. Member for Glasgow, Craigton (Mr. Millan) that his point, on this occasion, is somewhat misconceived, because the expenses can only, as I understand it, be claimed after the assessment. I believe that this Amendment will do what we want it to do.
§ Amendment agreed to.