§ Sir E. Boyle
I beg to move, in page 29, line 39, to leave out "by the person chargeable".
This Amendment, and the Amendment in page 30, line 1, to leave out "included in his emoluments" and to insert:treated as emoluments of the holder or past holder of the office or employment".are drafting Amendments, but perhaps I might explain them very briefly to the Committee.
Subsection (4) of the Clause lays down when income is to be treated as received for the purpose of determining the year of assessment. It says that payments are to be treated as income received by the person chargeable on certain dates. This expression is quite all right for the ordinary, straightforward case of a payment received by an employee and assessable on him, but it is not suitable when 737 the assessment is to be made on executors.
Where executors are chargeable in respect of a payment which is either made to them or was received by the employee in his lifetime but is not assessed to tax, the subsection, as it originally stood, made the payment the emoluments of the executors, arising when the employment came to an end. This was obviously inapt, because the executors did not then exist.
As a result of the first Amendment, the Clause stops short of the time that a payment is to be treated as income received by the person chargeable. The second Amendment ensures that it should be treated as the emoluments of the employee.
§ Amendment agreed to.
Further Amendment made: In page 30, line 1, leave out "included in his emoluments" and insert:
treated as emoluments of the holder or past holder of the office or employment".—[Sir E. Boyle.]
§ Motion made, and Question proposed, That the Clause, as amended, stand part of the Bill.
§ 6.15 p.m.
§ Mr. Millan
This is the first Clause dealing with payments to people after retirement, the so-called golden handshakes. Clause 36 also deals with this question, and most of the meat of the argument will probably come on that Clause. Therefore, all I want to do on this Clause is ask two specific questions of the Financial Secretary. They are points of which I am not very clear. Subsection (6) says:This section does not apply to",among other things,(a) a payment made in pursuance of an obligation incurred before that date",the date being 6th April, 1960.
I have two questions. First, does the phrase "an obligation" import only a legal obligation into the paragraph? We want to deal with questions where there is a legal obligation and not a moral obligation or any other sort of obligation.
Secondly, subsection (6) states that the Clause will not apply toa payment made in pursuance of an obligation".The cases here are rather difficult, but in the normal course of things a payment 738 made in pursuance of an obligation would he chargeable to tax, in the sense that it would arise directly out of the profession, trade or vocation. Subsection (2) says:This section applies to any payment (not otherwise chargeable to income tax)In other words, if the existing law is that any payment is chargeable to Income Tax, we are not dealing with it under this Clause.
Subsection (6, a) deals with the kind of payment which in many circumstances at least will already be chargeable to Income Tax. Since it is already excluded under subsection (2), why should it also be excluded under subsection (6, a)? There may be other cases where the payment made in pursuance of an obligation is not chargeable to tax. Will the Financial Secretary or the Solicitor-General tell us briefly the circumstances where that applies?
§ The Solicitor-General (Sir Jocelyn Simon)
The first question asked by the hon. Member for Glasgow, Craigton (Mr. Millan) is whether "obligation" means a legal obligation, or would extend to include a moral obligation. The answer is," No "; it means a legal obligation, a binding obligation. It covers the sort of case where a binding arrangement has been made between an employer and an employee, but no payment has been made before the relevant date.
The hon. Gentleman's second question concerned the mutual relationship between subsections (2) and (6). Subsection (2) excludes any payment which is otherwise chargeable to Income Tax. This is really to ensure that even though the payment falls within subsection (2)—it is not otherwise chargeable to Income Tax—it shall be excluded if the obligation was incurred before Budget day in the circumstances I have described. In other words, the first barrier against the payment falling within the terms of the subsection is that it was otherwise chargeable to tax; but oven if it is not otherwise chargeable to tax, if it was in pursuance of an obligation incurred before Budget day it is still excluded.
§ Question put and agreed to.
§ Clause, as amended, ordered to stand part of the Bill.