HC Deb 26 June 1963 vol 679 cc1457-61
Mr. Graham Page

I beg to move, in page 16, to leave out line 33 and to insert "where a person claims".

Mr. Speaker

It will probably be convenient to discuss with this Amendment the next one in page 16, line 37, leave out "and" and insert "then unless it appears".

Mr. Page

These Amendments are quite closely related to our discussion on the previous Amendment. Under Clause 15(2), as has been said, this tax is on the amount of rents receivable and not necessarily on the amount received. It is possible, therefore, under Clause 17 to obtain relief from taxation upon rents which have not been paid. Otherwise the taxpayer might have to pay tax on money which he has not received and was not strictly entitled to receive because there was default on the part of the payer, or he properly surrendered his right to claim it. In order to get that relief under Clause 17, the taxpayer has to prove three items.

I hope my hon. Friend the Financial Secretary can help us on this. I am not sure what is meant by "proves". Every claim for relief has validity as if it were on oath because of the penalties for wrong or false claims. When the taxpayer is being given the right to claim a relief under the Income Tax Acts and in other respects it is usually on the basis that he must show cause to the satisfaction of the surveyor, or the Commissioners—not that he must prove certain things. If he makes a statement claiming relief, he must satisfy his inspector that he is entitled to that relief.

That phrase, or something like it, was used by my hon. Friend in discussion of the last Amendment—for example, "if the surveyor is satisfied as to the correctness of the declaration"—not, "if the taxpayer proves". In Clause 17 he is called upon to prove that he has taken reasonable steps to enforce his rights against the tenant, or that if he has waived his right he has done so in order to avoid hardship to the tenant. I do not think that under any other Schedule or case the taxpayer is called upon to prove that he has not received a sum. If he can show to the satisfaction of the Commissioners that he has not received it, he does not have to go into elaborate proof.

I stress that Case VIII is not like an ordinary assessment against which one can appeal. In this case the sum is leviable on a fictitious amount. It is leviable on the rents the person was entitled to receive in the previous year to assessment.

Mr. Houghton

That is not a fictitious amount, is it?

Mr. Page

It is a fictitious amount so far as concerns the year of assessment. It is a notional amount, if the hon. Member prefers that word. It is an amount on which his tax is based although he may not have received it in fact. In order to show that he has not received it, and is not entitled to recover it, he has to prove certain imprecise conceptions in the Clause—reasonableness or hardship—which are extremely difficult negative conceptions to prove. It is wrong to place on the taxpayer the burden of proof. Surely the assumption should be that the creditor does not remit a debt without some good cause. If that case can be taken to the Commissioner he should be entitled to his relief.

The way in which the Clause would read if the Amendment were inserted is as follows: Where a person claims that he has not received an amount which he was entitled to receive in respect of any rents or receipts on the profits or gains arising from which he would be chargeable under Case VIII then unless it appears…". I need not read the next two paragraphs. This is a fairer and more reasonable way to grant this right to relief—to allow the taxpayer to put forward his claim and the facts and to show to the satisfaction of the authorities that he is entitled to this relief.

Mr. Barber

I first assure my hon. Friend the Member for Crosby (Mr. Graham Page) that there is no particular significance in the use of the word "proves" in this Clause. It is true that in other parts of the Income Tax Act reference is made to facts being established to the satisfaction of the Commissioners or of the surveyor. But if my hon. Friend will look at the Sections in the 1962 Act from Section 208 onwards—I have refreshed by own memory—he will find that they deal with personal and other relief and that in Section after Section—209, 210, 211, 212—dealing with all manner of personal reliefs, there is reference to "proved" by the taxpayer.

Mr. Houghton

I understand that in law a man must prove that he has a wife.

Mr. Barber

I should have thought that that was a pretty reasonable thing to say. These Amendments to Clause 17, which provide a landlord with relief in respect of rent which he is unable to collect, are presumably intended to transfer the burden of proof from the taxpayer to the Revenue. I am sorry to have to disappoint my hon. Friend, but I have taken a certain amount of advice on the drafting of his Amendments and I am afraid that I have come to the conclusion that these Amendments in fact amount to saying that if the claimant has good reason for not collecting his rent he is not to be given any relief, but if he has no good reason for not collecting his rent, he is to be given relief—which is precisely the reverse of what my hon. Friend wants to do.

But I will devote a moment to the merits of the proposal. The basis of the charge under Case VIII is the rent which the landlord becomes entitled to receive in the tax year concerned. Clause 17, however, gives him relief where for good reason he is unable to recover the rents to which he is entitled. A similar relief is given by a concession in Great Britain and, strange though it may seem, by Statute in Northern Ireland in relation to tax under Schedule A and the excess rent provisions of Case VI of Schedule D.

In order to establish his claim for relief for lost rent under Clause 17 the claimant is required to prove three things—and I think I need not trouble the House by going over the various matters on which the inspector would have to be satisfied, because they are clearly set out in the Clause and have been referred to by my hon. Friend.

My hon. Friend's Amendments are intended to transfer the onus of proof that these conditions are satisfied from the tax- payer to the Revenue. I will leave aside a moment the fact that I do not think that his Amendment would achieve that object. I think that my hon. Friend's proposal is wrong. After all, it is the taxpayer who knows the facts. It is the taxpayer who has the information necessary to prove it. The Revenue will not normally have the information necessary to disprove a claim which is false. It is, therefore, always the rule that the onus is on the taxpayer to establish a claim to relief from tax. There is no good reason in this case for departing from the general rule. The taxpayer, after all, is surely in the best position to know whether he received the amount in question, what steps he took to enforce payment, and, if the payment is waived, what were the circumstances of the waiver. It is reasonable that the onus should be on him to satisfy the Inland Revenue or, if he cannot reach agreement with the inspector, to satisfy the Appeal Commissioners on these points.

Therefore, in the view of my right hon. Friend the approach of this Clause is right in principle, for the reasons which I have given. However, even if that view were not acceptable to my hon. Friend, he will, I hope, bear in mind that the Amendments, according to the advice I have received, do precisely the opposite of what he intends them to do. I hope that for that reason, if for no other, he will not press them.

Amendment negatived.

Mr. du Cann

I beg to move, in page 17, line 2, to leave out from "received" to the end of line 6 and to insert: the claimant or, if he is dead, his executors or administrators shall not later than six months thereafter give notice in writing of its receipt to the surveyor, and such re-adjustment of liability to tax (for all relevant years of assessment) shall be made as may be necessary and may be made at any time at which it could be made if it related only to tax for the year of assessment in which the amount, or the part of the amount, is received. (2) The foregoing subsection shall be deemed to be included in the third column of Schedule 6 to the Finance Act 1960 (relating to penalties on persons failing to furnish particulars or furnishing false particulars). Clause 17 provides for the taxpayer to be granted relief from tax where he cannot obtain payment of rent or other income to which he is entitled in respect of land. Where the relief is given, the taxpayer will be put in the same position as if he had never received the rent, or whatever it may be. If he subsequently recovers the rent, the relief is to be withdrawn, and the result will be that the recovered rent will be treated as income of the year when it was due and not of the year when it was actually paid.

Under the Clause as it stands, the Revenue's power to adjust the taxpayer's liability in such circumstances is subject to no time limit. Representations have been made to us by various learned bodies—I make the point particularly in answer to a suggestion which was very properly made by the hon. Member for Sowerby (Mr. Houghton) yesterday—that the Revenue's power to raise the assessment in these cases should be subject to the normal time limits. The Amendment accordingly imposes a time limit, which ordinarily would be six years after the end of the year of assessment in which the payment is received, on the Revenue's power to raise assessments for past years.

I want to make two other points. First, in order to ensure that the Revenue is duly informed where taxpayers recover arrears of rent a claimant is obliged to notify the Inspector of Taxes within six months. If a poor claimant is dead, the same obligation falls upon his executors or administrators. Secondly, in cases of fraud there will be no time limit available.

I hope that the Amendment will commend itself to the House.

Amendment agreed to.