§ 3.52 p.m.
§ Order for Second Reading read.
§ The Financial Secretary to the Treasury (Mr. Alan Green)
I beg to move, That the Bill be now read a Second time.
The Bill brings the law governing Income Tax machinery and procedures up to date. It should prove a useful contribution to the modernisation and simplification of the tax code, enabling worthwhile administrative changes to be made immediately and paving the way for possible future reforms. It will assist the revenue to adopt the most businesslike arrangements for dealing with assessments and claims and for collecting tax. I also believe that its proposals will be welcomed by the professional bodies concerned and that it will be to the convenience of the general body of taxpayers.
The Measure incorporates a number of changes which have been candidates for a Finance Bill in recent years. It is difficult to find room in a Finance Bill for procedural reforms or time for their consideration during the Budget and Finance Bill debates, when other more immediately interesting matters fully occupy the time of the House. This has resulted in the accumulation over the years of a series of acceptable changes, any one of which hardly warranted priority taken by itself, but which, taken together, seem well worth making.
Accordingly, the Government decided to combine these charges in a Bill which will not affect the scope of the charges to tax and which can, therefore, properly be considered apart from and before the Budget and Finance Bill. I am particularly glad that it falls to me to introduce the Bill, for its most important purpose is to give effect to two recommendations of the Select Committee on Estimates based on evidence given to a sub-committee, of which I happened to be chairman.
These recommendations were, first, that responsibility for the making of Income Tax assessments should be transferred from the general or special 388 commissioners to the inspector of taxes, as earlier recommended by the Royal Commission on the Taxation of Profits and Income, and by its predecessor, the 1920 Royal Commission, and, secondly, that Profits Tax assessments should also be made locally by the inspector of taxes, instead of centrally by the Board of Inland Revenue. Effect is given to these recommendations by Clauses 5 and 10.
I think that the proposals in the Bill regarding assessing functions will be more easily followed if I deal first with these Clauses and certain associated Clauses. I will come back later to Clauses 1 to 4. In Clause 5 there is a saving for certain income from Government and foreign securities which will be assessed centrally by the Board. Clause 5 also transfers formal responsibility for making Surtax assessments from the special commissioners to the Board, but the Board is given a general power to delegate any of its assessing functions to an officer of the Board. This would enable the administration of Surtax to be decentralised, in whole or in part, without further legislation, if this course seemed desirable.
This bears on another recommendation of the Estimates Committee; that the possibility of decentralising Surtax should be re-examined. The Board explained to that Committee why it would be desirable to defer a decision on this for a year or two, but, whatever views may be held on the merits, I am sure that it would be generally agreed that a decision on this point should depend on administrative considerations and that this opportunity should be taken of introducing the necessary enabling legislation.
The removal of nominal responsibility for the making of assessments from the commissioners should be generally welcomed. Nominal though the responsibility may be at present, it has meant that Income Tax assessments have tended to be made in batches two or three times a year. This has meant congestion of work for professional advisers and, therefore, some inconvenience to taxpayers, as well as some additional cost to the Revenue.
This change will mean the abolition of the office of additional commissioners. These commissioners have done good 389 service and I should like to thank them warmly for the work they have performed. I am sure that the committees which advise the Lord Chancellor on the appointment of general commissioners will have the names of those who have been acting as additional commissioners very much in mind when they make further recommendations.
The recommendations of the Estimates Committee and the Royal Commission on this topic were unqualified. Further examination of the implications, however, have led us to propose one important restriction on the assessing powers to be given to the Revenue. This is contained in Clause 6, with a corresponding restriction for Profits Tax included in Clause 10.
Assessments for years outside the normal time-limits in cases of fraud, wilful default or neglect are to be made only with the leave of a general or special commissioner. It did not seem right to give the Revenue unfettered discretion in such cases, especially as the present practice is to draw them especially to the attention of the assessing commissioner.
The Royal Commission also recommended that the appeal commissioners should be relieved of their other executive functions. Most of these relate to claims for reliefs and the transfer of functions is effected by Clause 9 and its consequential repeals.
I return to Clause 1. When the assessing responsibilities have been transferred to the Inland Revenue, the general commissioners will be free to devote themselves entirely to the hearing of appeals. It is hoped to help them in this by removing the present limits on the number of appointments which may be made; and Clause 1 also empowers the Lord Chancellor to alter the number and boundaries of the "divisions" for which general commissioners act. This will enable the number of commissioners for any division to be matched to the volume of appeal work for that division.
It is, of course, the appeal work that has become the main responsibility of commissioners in recent years—and it is a very important responsibility. When Income Tax was first introduced, in 1799, its administration was placed generally in the hands of local bodies 390 of general commissioners. Over the years, this work has come largely into the hands of the Government, but it has remained the position and will still remain the position that the inspector of taxes as the representative of the Government does not have the final say as to the amount of tax that any person must pay. The final arbiters, subject only to appeal to the courts on a point of law, art the general commissioners and they with their local knowledge are the persons best qualified to decide the many questions of fact which come before them.
It has often been said that the Income Tax system of this country can work only so long as it is accepted, however reluctantly, by the great majority of taxpayers. If that acceptance is forthcoming, and I believe that it is, it is mainly because members of the public know that if they disagree with the assessments made on them, they do not have to accept the inspector's say-so and can put their case to an independent tribunal in whom they may have the fullest confidence.
This is not, I trust, an inappropriate moment for a Financial Secretary to make his bow to the way in which the great bulk of the taxpayers face up to their responsibilities for the payment of tax. I do not think that it is fully appreciated how much time the commissioners devote to their duties. I should like here to pay them a most warm tribute for the work they do. There are about 5,500 commissioners at work in 700 divisions throughout the country, meeting regularly and in some of the busiest divisions as frequently as once a week, or perhaps a fortnight.
To preserve the confidentiality of appellants' Income Tax affairs, the public are not admitted to commissioners' proceedings and for this reason the valuable public service which they render goes largely unrecorded. Their work is nevertheless as important within Income Tax as that performed in another respect by the lay justices.
Like justices of the peace, the general commissioners receive no payment for their services. They have, however, since 1958 received travelling and overnight lodging allowances similar to those paid to justices. The Administration of Justice Bill, now before the House, pro- 391 poses that justices should also be paid day subsistence allowances and we are taking the opportunity of the present Bill to authorise the payment of day subsistence allowances to general commissioners as well.
At this point I might perhaps mention one or two other changes in Clause 1 relating to the appointment and tenure of office of general commissioners. Since 1958, most appointments of commissioners in England and Wales have been made by the Lord Chancellor. The City of London, certain City corporations and 11 other ancient cities, selected as long ago as 1799, at the time that Income Tax itself was selected, and some of them now relatively small, have, however, retained the power to make a number of additional appointments.
We propose that all appointments shall in future be made by the Lord Chancellor. We have sought the views of these appointing authorities and I am glad to say that they are all content to surrender these powers. In Scotland, the general commissioners are appointed by the county councils and by certain town councils and we are proposing no change there. Finally, on Clause 1, we propose to introduce a retiring age of 75 for commissioners such as already exists for justices of the peace.
Clause 2 deals with the commissioners' clerks. It introduces a retiring age of 70, with extension beyond that age to a limit of 75, if the commissioners so wish. This follows broadly the present practice for justices' clerks, and we are also making provision for the payment for the first time of pensions to the small number of full-time clerks to commissioners.
To dispose of the first Part of the Bill, headed "Administration", I take now Clauses 3 and 4. Clause 3 and its associated repeals makes it clear that inspectors or collectors, wherever serving, may act in relation to any part of the country. They may also continue any proceedings, legal or administrative, begun by any other inspector or collector, without prejudice, of course, to the right of the courts to require any particular inspector or collector to appear.
392 Clause 4 and Schedule 1 generalise the statutory declarations of secrecy, at present limited in terms to Schedule D. This follows a recommendation of the Royal Commission—and the Clause also requires the same declarations to be made by members of appeal tribunals not at present covered. I should also mention here that there is no reason why these first four Clauses should not come into force one month after the passing of the Act and provision is made accordingly. The remainder of the Bill would come into force on 6th April, next year.
The proposals to which I have referred so far have been concerned primarily with the making of assessments and the determination of appeals. I now pass to two Clauses directed to facilitating the collection of settled liabilities. Clause 8 extends the limits on the amounts of Income Tax which the Revenue can recover by local proceedings by enabling recovery action to be taken in certain cases in the county court as an alternative to High Court proceedings. At present, collectors can take local action for recovery by proceedings before magistrates—in Scotland, in the sheriff court—but only where the unpaid debt is less than £50. The £50 figure dates from 1924. Where the unpaid tax is £50 or more recovery proceedings have to be taken in the High Court—in Scotland, in the Court of Session—which involves heavier costs than local proceedings.
I think that it is clearly desirable to enable local proceedings to be taken in a wider range of cases, and for this purpose Clause 8 confers on collectors additional rights to take proceedings in the county court—in Scotland, the sheriff court. The ordinary limits on amount in those courts will apply: namely, £400 in England and Wales, £300 in Northern Ireland and £250 in Scotland.
The other Clause dealing with collection is Clause 13. This will interest the hon. Member for Sowerby (Mr. Houghton) particularly. This extends the existing provisions for what is usually known as a "payment on account" to be made before the determination of an appeal. In strictness, such payments follow at present a decision by the appeal commissioners that part of the tax 393 assessed appears not to be in dispute. In practice, agreement is usually reached without bringing in the commissioners but sometimes the payment on account is not, in fact, paid as promptly as it is agreed,. Where this happens the case must be taken to the commissioners for a formal order, with consequent further delay in collection. This Clause, modelled on the provisions under which the appeal itself can be settled by agreement without a formal order by the commissioners, will enable agreed payments on account to be collected without troubling the commissioners.
Other new provisions requiring special mention relate to Northern Ireland cases. These are to be found in Clauses 14 and 15. There are no general commissioners in Northern Ireland; all appeals go in the first instance to the special commissioners. The Northern Ireland taxpayer can, however, in effect, have his appeal against an Income Tax or Profits Tax assessment determined by a local tribunal by requiring a rehearing by the county court judge if dissatisfied with the decision of the special commissioners. This rehearing provision has caused much unnecessary work and has enabled dilatory taxpayers to delay payment. New arrangements have, therefore, been worked out in consultation with the Northern Ireland Government. Under these the Northern Ireland taxpayer will retain his right to go to the county court. This will, however, be not a rehearing but an alternative to the special commissioners, if the taxpayer so elects.
Clause 15 also provides for a right of appeal to the courts on a point of law against determination by the county court judge whose determinations at present, on a rehearing, are final. Such an appeal from the county court will go to the Court of Appeal in Northern Ireland under the County Courts Appeals Bill (Northern Ireland) 1964, at present before the Northern Ireland Parliament. Provision is, therefore, made in Clause 14 for cases stated by the Special Commissioners in Northern Ireland cases to go to the Court of Appeal also.
Those provisions of the Bill which I have not so far mentioned can, I think, be disposed of at this stage quite quickly. Clause 7 provides a single statutory base for the annual returns of income in general use. These are at present issued 394 under the authority of an amalgamation of provisions, some directed to income not taxed at source, others requiring information only in support of claims for allowances.
The opportunity has been taken in Clause 9 to set out anew the procedures for making and determining claims to reliefs and allowances, and we hope that Schedule 2, which lists the standard procedure for virtually all claims, will prove helpful. Such changes as are made accord with accepted practice, and they are in no way prejudicial to existing appeal rights or options.
Clause 11 and Schedule 3 are required to determine which general commissioners have primary jurisdiction on appeals; that is, to determine the "place of appeal", replacing the present "place of assessment" which ceases to be significant. The rules again preserve all the options at present open to the taxpayer, and new provision is made for transfers of proceedings between bodies of commissioners to be agreed between the parties.
Clause 12 is largely a restatement of incidental appeal provisions, but new provision it made for the acceptance of late appeals by the inspector without reference to the commissioners, so authorising what is, in fact, generally accepted practice.
Finally, opportunity is taken in the various Clauses and Schedules of clarifying the existing law and of repealing many provisions which are spent or obsolete. As a result, it will be possible to remove about 65 Sections and five Schedules from the Statute Book and to facilitate that future consolidation which I am sure we all wish to see when time permits.
I feel quite sure that the general purpose and main proposals in the Bill will commend themselves to hon. Members on both sides of the House, and, certainly, their inclusion in a management Bill will have—I am sure—the support of the hon. Member for Sowerby who has on more than one occasion suggested—and often quite strongly—that such a Measure deserved consideration.
Administrative matters are perhaps not so exciting as the heady topics we debate on the Finance Bill, and the present 395 administrative arrangements for the Income Tax have served us well for a long time; but I am sure the time has now come to modernise them. A great deal of thought has gone into the proposals in the Bill. I believe that they will give us a sensible and up-to-date code of machinery and procedures for operation. Accordingly, I trust that the House will give the Bill a Second Reading.
§ 4.14 p.m.
§ Mr. Douglas Houghton (Sowerby)
I am sure that the whole House will thank the Financial Secretary for his very clear and lucid explanation of the Clauses of the Bill. I wish to acknowledge straight away his kindly reference to my own efforts over many years to get a Bill of this kind. I should have appreciated the honour had the Government asked me to add my name to the Bill, because I have been anxious that reforms of administration should be brought before this House at a time when we were not under the stress of the timetable and the controversial matters which are frequently in the Finance Bill itself.
On the face of it, this is very dull stuff. Only those in the business know what an exciting and historic Bill this is. It ends out-of-date and cumbersome procedures and a long-standing and wasteful fiction in Income Tax administration. The Financial Secretary made it clear to the House that the Bill is administration. It deals in the main with the machinery of assessment and appeals. It neither imposes additional tax nor gives any relief from tax. All it does is sweep away some of the remaining cobwebs of 1842. It repeals more than it enacts, as the hon. Gentleman pointed out, towards the conclusion of his speech, and later I shall be referring to the great waste-paper basket of the Bill, which is Schedule 6.
The Financial Secretary harked back to 1920. I hope that the House will bear with me for a few moments while I sketch the history of the Bill. I am sure that the Financial Secretary is right when he says that this will be a non-contentious Bill, but 43 years ago, when a Revenue Bill was first introduced, it was so controversial that the Government withdrew it before the Second Reading. The proceedings on that Bill 396 were an absolute fiasco, because the Government were beaten by the Daily Mail and the General Commissioners for the City of London before they had uttered a single word in this House in defence of the proposals in the Bill. There has never been an occasion, as far as I know, to equal it.
Strong forces were gathered behind the preservation of the traditional local administration of the Income Tax. The general commissioners were held out to be the estimable body of gentlemen, and certainly they were—and are—who stood between the tyranny of bureaucracy and the helpless taxpayer; the assessors were men who saw that justice was done; and the collectors held themselves out to be the buffer between the bureaucracy and the taxpayer. Emotions ran high in 1920. The surveyor, as he then was—now the inspector of taxes—the Treasury watchdog, had his function, and no one doubted it, but neither the House, nor, so it appeared, the country, was then willing for the inspector of taxes to exercise legally the functions which, by force of circumstances, he had come to exercise informally within the procedure of the Income Tax Act.
I think that the story of the Bill may be a slight discouragement to those in the House who are calling upon the country to modernise itself and bring itself up-to-date and somewhat of a discouragement to those in the House who would like to see law reform got under way, because my short story will show that the clarion call comes from a Legislature which takes as its own model not the hare, not even the tortoise, but the snail. That is the history of this Bill.
We had a Royal Commission in 1920, and Clauses in the Bill are derivatives of recommendations by that Commission. It recommended that all collectors should be appointed by the Board of Inland Revenue and that the general management of collection should be under the Board's control. It recommended that, as soon as administratively possible, all collectors should become civil servants. It recommended that the office of assessor should be abolished and his duties should devolve upon the inspector, and that the functions of general commissioners should be practically confined to 397 appeals. That all sounds commonplace today, and part of it is in the Bill, but it seemed outrageous then. I can only think that the Government did not give way on that Bill except under the strongest pressure.
On 22nd February, 1921, the then Leader of the House was asked what he was going to do about the Bill and whether it would be taken on the Floor of the House. He said:No, I shall ask the House to send it upstairs. That is the only hope of passing it. If the House treats it as a contentious measure it will not be proceeded with."—[OFFICIAL REPORT, 22nd February, 1921; Vol. 138, c. 760.]And in the event it was not proceeded with. They introduced the Bill on 6th April, 1921—a very appropriate date: the first day of the Income Tax year.
I looked at that Bill the other day. It proposed to abolish the office of Assessor and the notices to be issued by the Surveyor. It proposed that the power of making assessments should go to the Surveyor in the case of Schedules A, B and E. As regards Schedule D, the power to assess was to be put in the hands of the inspector only if any assessment did not exceed the amount returned for assessment, or was computed from accounts furnished by the taxpayer, or did not exceed the amount assessed for the previous year on the same source of profits or income. That was a real strait-waistcoat for the inspector of taxes, but it was in that Bill of 1920 which, apparently, some vested interest and public opinion could not swallow.
On 4th May, 1921, the then Leader of the House was asked what was to happen to the Bill. He replied:It is not now proposed to carry the Revenue Bill further this Session"—[OFFICIAL REPORT, 4th May, 1921; Vol. 141, c. 1045.]The next relevant entry in the OFFICIAL REPORT is "Bill withdrawn"—and that is the last we hear of it. It was sunk without trace, and for years afterwards the ancient procedures and wasteful methods which the Royal Commission in 1920 unanimously declared had "outlived their usefulness" were continued.
The inadequate machinery had to be worked by the Inland Revenue. The grand total of time and materials wasted in administering the Income Tax under the old provisions which this House failed to reform 43 years ago must be very 398 great, indeed. I humbly suggest to this House that if that is its record, it is not in a position to lecture other people about getting rid of cumbersome methods, about bringing their organisation up to date, about cutting out things that lead to waste of staff, and all the rest. We have been guilty for 43 years, but I see no blushes on the faces of right hon. and hon. Members opposite. After all, they have been able to do something for the last 12 years—but I will not make a party point of this; I will say that successive Governments have failed to bring about the reform
They have done some of it piecemeal. Under the stress of war, it was necessary to make drastic changes in the method of assessment of wages and salaries, and a very significant change was made then—
§ Mr. R. H. Turton (Thirsk and Malton)
I am sure that, as Chairman of the Public Accounts Committee, the hon. Gentleman will wish to pay tribute to the fact that this situation has been ended through the Estimates Committee, and the Chairman of Sub-Committee C of the Estimates Committee, having gone into the question and advocated the alteration.
§ Mr. Houghton
I am obliged to the right hon. Gentleman, but he is rather overtaking my speech. I will pay full tribute to Sub-Committee C of the Estimates Committee but, if the House will bear with me, this is the only entertainment the House will have. All the rest will be had going on individual Clauses, so hon. Members should make the most of this light interlude on the history of the Bill.
I shall not weary the House by describing the appointment and swearing in of assessors who no longer assessed, of collectors who could no longer collect, and of general commissioners who had to be persuaded to make and allow assessments they never saw, but that is what has happened in Income Tax administration over these years. It is no wonder that two Royal Commissions paid tribute to the resourcefulness and skill with which the Inland Revenue improvised and circumvented to overcome the impedimenta of a century.
It is hard to believe that the withdrawal of that Bill in 1921 meant that 399 the only statutory means of communication between the tax assessors and the taxpayers generally was the church door notice—and that was only one stage removed from the town crier. Assessors nailed these notices on church doors right up to 1939. In 1941, through the initiative of the agreeable, and subsequently notorious, Guy Burgess—who died in Moscow just recently—the first radio talk on Income Tax was given, and it fell to me to give it, in a programme called, if I may say so without advertising, "Can I help you?". That is still a popular feature of our sound radio, and I am glad still to be in it.
That was a break-through into the twentieth century but, of course, the machinery of Income Tax could not stand still even though the House had failed to reform it by statutory means. Collectors had to be absorbed into the establishment. It took 11 years after the dropping of the 1921 Bill to embark on the first Measure of centralisation. The old service was by then near breakdown. Collectors appointed by local commissioners were frequently incapable of doing the job properly, large sums of money were passing through their hands, and the Public Accounts Committee and the Comptroller and Auditor General drew attention to the increasing amount of all faults and muddle.
The Government had to act, as they did in 1931. But, true to tradition, in 1952 this House passed the Income Tax Act, a consolidation Measure, which, in the Fourth Schedule, reaffirmed the power of general commissioners to pursue defaulting collectors beyond the grave. I quote from paragraph 6(1) of the Fourth Schedule of the Act of 1952—not of 1852, but of 1952:If a collector fails to pay any tax or moneys received by him as collector, and detains in his hand, and does not pay or account for the same in manner directed by this Act, the General Commissioners, in their respective divisions, may seize and secure the freehold estate and all other estate, both real and personal, belonging to him or which has descended or come into the possession of his heirs, executors, administrators or assigns, wheresoever the same can be discovered and found.That was the power given to general commissioners of Income Tax as recently as 1952. When I asked how many collectors were then in a position to be pursued beyond the grave, the 400 answer was. I think, one. This present Bill now tumbles the whole lot into limbo.
The Royal Commission of 1955 had a go at this business, too, and dealt with it all in Chapter 31 of its Report. Six years later, the Estimates Committee had a go and, as the right hon. Member for Thirsk and Malton (Mr. Turton) has just said, the hon. Gentleman the Financial Secretary, as Chairman of Sub-Committee C, heard all the evidence, produced an admirable Report, and pursued the recommendations with a doggedness that was quite reassuring. The Sub-Committee put the Board of Inland Revenue on the spot—I hope that the hon. Gentleman is still keeping the Board there. As he has said, the proposals in this Bill emanated from the Report of the Estimates Committee.
So here we are, in the year 1964; we complete the story of 43 years of galloping reform—and arrive, breathless, at the Second Reading of this Bill. That is the story. Indeed, I believe that we only get the Bill now because, the Government having postponed the General Election, there is a little lull in the legislative programme and the Bill has been pulled out of the pigeon-hole—though I am glad that it has been. I am sure that the House will welcome it. I can assure the hon. Gentleman and the House that the whole of the Inland Revenue Department will welcome it, not because its staffs are thirsting for more power, or thirsting to exercise the responsibilities of bureaucracy any more intensively than in the past, but because it will facilitate their work.
For an inspector to be able to make an assessment at any time, especially if it has been agreed with the taxpayer, to clinch the thing, get it settled and the money paid, will surely be good business, instead of waiting for the general commissioners to raise additional assessments, with all the apparatus and paraphernalia connected therewith, leading often to much delay and to the possibility of losing the money in the end.
The hon. Gentleman referred to almost all the Clauses, and I was grateful to him for explaining Clause 1 which gives power to change the number and the boundaries of divisions. That stems directly from the Report of the Royal Commission of 1920. The method of 401 appointment of general commissioners comes partly from paragraph 348 of the 1920 Royal Commission and partly from paragraph 958 of the Radcliffe Commission of 1955. It now completes the process which was begun in the Tribunals and Inquiries Act, 1958, when, as the hon. Gentleman has explained, certain exceptions from appointment by the Lord Chancellor were then accepted by the House, and I am very glad to hear that a clean sweep can be made by agreement with all those concerned. That is a good thing.
Clause 2 is welcome because it deals with the position of many public servants who are full-time, and who give long and faithful service, but who have not been provided with any superannuation arrangements. They are not civil servants, and it is right that they should continue not to be civil servants. They are servants of the commissioners, who, in their capacity as the appellant body, will want to have a clerk who can advise them independently without owing any allegiance whatever to the Inland Revenue Department.
Clause 4 deals with declarations of secrecy which came under some criticism in paragraph 949 of the Radcliffe Report. There were some weaknesses in the declarations that had been required under the existing law. The new proposals will make them more comprehensive.
Clause 5 is the major Clause and the main reform of the Bill. It transfers to inspectors and to the Board of Inland Revenue the power of making assessments. The first part implements the recommendations of the Radcliffe Committee, paragraph 943, and the second part implements paragraph 950. I was very glad to hear the hon. Gentleman say, because I was going to ask him, that Clause 5 paves the way to decentralisation of Surtax.
The hon. Gentleman was Chairman of Sub-Committee C of the Estimates Committee, which had all the evidence from the Inland Revenue Department, the Income Tax Payers' Society, the Association of Certified and Corporate Accountants, the Federation of British Industries and staff associations and which showed a considerable weight of opinion in favour of decentralisation of Surtax. The Inland Revenue was a little 402 coy about it. It pleaded overwork. which is nothing new for the Inland Revenue—it is always suffering from it—and it begged for a little more time to consider what it should do. For the moment, I think that we can be content that it is now possible for that to be done without fresh legislation.
The Financial Secretary was right when he said that it had to be considered as a matter of administration in all its aspects. I do not think that we need any longer concern ourselves with any feelings of sensitiveness of the Surtax-payer about having his affairs dealt with by the special commissioners and not by the general commissioners. That was certainly in the matter to begin with, but I do not think these considerations weigh any longer. It is now a question of economy and efficiency of administration. I stall not detain the House by expressing any judgment on that matter.
I would only permit myself to say that I am sure that the Financial Secretary will agree that there is a good deal of inter-communication between district officers and the special commissioners at present, and a very large amount of that would be saved. There are factors on the other side. I suppose that I had better say outright that I am a decentraliser and have been for years. I think that it makes sense, and I hope that further examination will prove that that is a wise thing to do.
The Financial Secretary pointed out that Clause 6 qualifies the right of the inspector to make an assessment on his own when it is out of time on grounds of fraud, wilful default or neglect. Then he has to get a general or a special commissioner to assent to the making of the assessment which is out of time in those conditions. I think that that is a reasonable safeguard to the taxpayer. The inspector is then moving perhaps into a contentious field where a taxpayer may feel strongly about something and where tensions may develop rather more than at another time, but I think that for the inspector to get the support of an independent person is a reasonable safeguard.
Clause 8 is of importance because it deals with the power of recovery. It has been absurd that the recovery of unpaid Income Tax, not recoverable by 403 distraint, could be dealt with only by summary proceedings for amounts up to £50 and that recovery of amounts over £50 had to be taken through the High Court. It was quite fantastic. No wonder the so-called assessment division of the Inland Revenue has files years old because it cannot take proceedings for one reason or another, and I hope that this will clear up a lot of arrears which, under the existing system, have unavoidably accumulated.
In being able to go to the county court for up to £400 in England and Wales, £300 in Northern Ireland and £250 in Scotland—I do not know why there is this difference, but that has nothing to do with the case—we are adopting the limits provided for under the county courts procedure, which is right, and certainly no attempt should be made to overstep them in the interests of the Inland Revenue. Clause 10 is the counterpart to Clause 6 in relation to Profits Tax.
Clause 13 deals with the collection of the undisputed portion of an assessment which the taxpayer is questioning. The Financial Secretary described the existing procedure. On the face of it, it appears that this weakens a little the power of the Inland Revenue to recover the undisputed portion of the outstanding tax. As I see it, the provisions of the Clause apply only in the event of agreement being reached between the taxpayer and the Inland Revenue. If agreement is reached on the undisputed portion then that portion can be collected and payment can be enforced, but under Clause 13(2) it seems that the taxpayer is given 30 days from the date of reaching agreement to withdraw from it. He has a month to think it over after reaching agreement. If he decides that he would rather not, or his advisers suggest that he should not, continue, he can repudiate and only thereafter is he bound by the agreement reached.
If there is no agreement, it looks as though there is no means of enforcing payment on the undisputed portion of the assessment. We shall have to examine this a little more closely in Committee. I am not at the moment pressing for anything. I merely want clarity on this. We can conceive of circumstances in which the disputed portion of the assess- 404 ment is the smaller pair, so that by disputing the pence the taxpayer can delay payment of the pounds, and only if he reaches agreement on the undisputed portion is he bound to pay anything at all till the appeal is settled.
I think that the House will wish to be assured that taxpayers cannot play ducks and drakes and that if they want time to pay they should go to the collector for it in the proper way and not get it by methods of this kind. In parentheses, recalling that the Financial Secretary said that I would be interested in Clause 13, I wish to make clear that I do not owe anybody anything. There is no dispute on any part of my assessment. My interest in this matter is purely academic or administrative.
I can hardly contain my enthusiasm for the Bill and my pleasure at seeing it after all these years. I congratulate the Financial Secretary on being the ministerial agency for its introduction. It must give him great satisfaction to be able to do it, especially after all his work through the many sittings of Sub-Committee C of the Estimates Committee. I am sure that the whole House will give this new and bold jump into the Britain of tomorrow a warm welcome. This is modernisation. This is creating a Britain which is up to date. On these grounds alone we should welcome the Bill.
§ 4.43 p.m.
§ Mr. Alan Hopkins (Bristol, North-East)
I would not wish to cross swords with the hon. Member for Sowerby (Mr. Houghton), whom I hold in very high regard, but I think that he was chiding us perhaps unfairly about the tardiness with which the Bill had been produced. As the hon. Member pointed out, the Bill is a fair step in modernisation, but I am sure that he would be the first to agree that it is an extremely complicated Measure. I have spent some nights trying to read it. I confess that it was more likely to put me to sleep than otherwise when I tried to understand it. It is complicated, but very well worth putting on the Statute Book.
As a member of Sub-Committee C of the Estimates Committee, I should like to congratulate my hon. Friend the Financial Secretary on his perseverance 405 in climbing the ladder from the chairmanship of that Sub-Committee to the Financial Secretaryship of the Treasury and, wearing the latter hat, putting forward this Bill now. I should like to pay tribute to him for the way in which as chairman he conducted the inquiry. We all went into the matter very thoroughly and we appreciated the way in which my hon. Friend allowed his colleagues on both sides of the Committee to put their points to the witnesses. I am sure that all members of the Committee will agree with me that we performed a useful function and that the Report was well received upon publication.
I welcome Recommendation 6 by the Committee, on the abolition of the responsibility of additional commissioners for the assessment of returns. I remember hearing evidence of the reason for the appointment of these additional commissioners, and I go further back in point of time than did the hon. Member for Sowerby. I understand that in the middle of the last century it was found necessary to have additional commissioners because the inspector would not himself have the knowledge or the means of assessing individual incomes, particularly in the country. These individuals would not "come clean" with the inspector, whereas the additional commissioners, being possibly friends or competitors, would be more likely to know the income of the individual concerned. Times have changed and it seems that the need for additional commissioners is no longer as great, and, indeed, is not important at all today.
I also welcome particularly Clause 5, which I understood the Financial Secretary to say enables the decentralisation of Surtax to take place, should that prove possible in time to come. I well remember the evidence given before the Sub-Committee on this point. It seemed to me overwhelmingly in favour of decentralisation. I appreciate the position of the Inland Revenue in that it would take some time administratively to make this change possible, and in the initial stages it might cost more in collection than the present centralised system. Is it the intention of the Revenue to continue to look at the decentralisation of Surtax, which I am sure from the point of view of taxpayers as a whole is more desirable than the 406 dual return which they now have to make for Income Tax and Surtax?
My final point arises also out of the Report of Sub-Committee C relating to the treatment of taxpayers as a whole and the forms which are filled in. My hon. Friend the Financial Secretary may well remember Recommendations 13 and 14 which refer to the possibilities of simplifying memoranda and pamphlets at present issued by the Revenue, in the former case, and the content and design of the forms which are issued to taxpayers with a view to achieving greater simplicity and clarity in the latter.
In common with, no doubt, many hon. Members on both sides of the House, I have met in interviews many of my constituents who come with genuine problems relating to Income Tax and their returns. In most cases these could well have been settled if they had been in a position readily to understand what the whole form was about. I hope that my hon. Friend will be able to let us know whether any further steps have been taken in the last two years towards clarifying the forms of return sent out to taxpayers, and also what further information has been made available to taxpayers as a whole through the offices of the local inspector of taxes.
I appreciate that this is probably not a matter that requires legislation. I hope that my hon. Friend confirms this and will be kind enough to let us know whether this forward-looking part of the Bill will also be interpreted in the spirit in which the tax is extracted from taxpayers as a whole. I join in welcoming the Bill.
§ 4.50 p.m.
§ Mr. A. Woodburn (Clackmannan and East Stirlingshire)
I should like to add my congratulations to the Minister for bringing in this revision of the administration, and the collection of Inland Revenue. My experience with constituents who come to me about Income Tax problems is that, fortunately, most of them are within reach of an Inland Revenue office and my advice to them always is to go to see the inspector of taxes. I find generally that the inspectors of taxes, and their staffs, even though they may be busy, are always most helpful in dealing with people who have difficulty in understanding the forms and understanding how to fill them up. We 407 ought to pay tribute to the work they do in this way. Many people find it difficult to fill in the forms and are rather frightened by them, especially if they do not ordinarily have to deal with financial affairs.
§ Mr. Hopkins
The point I was trying to make—and I entirely agree with the right hon. Gentleman—was that if the forms themselves were more comprehensible the need to trouble the inspectors would not be as great.
§ Mr. Woodburn
Yes. I am in no way criticising the hon. Gentleman. My experience is that no matter what the form is many people will find it difficult to fill it in. Indeed, I will make a confession: I find it difficult sometimes myself to understand exactly just what is expected on this form.
There is another reason why we should congratulate the inspectors. When we consider the shortage of staff and the amount of work they have to tackle, then the amount they accomplish is quite remarkable. I should like the Minister to tell us whether there is any possibility of increasing the inspectorate. It is not an easy thing to be an inspector of Income Tax. It requires quite a lot of knowledge of the law and an intuitive faculty, as it were, to make the best job of it. The inspectors do quite wonderful things sometimes in estimating people's incomes which the people themselves do not know. It is quite remarkable how many people there are who do not know what their incomes are.
I remember when the members of the Supreme Soviet came over here I was asked to look after those who were going to Scotland. I took them to a farm and they were extremely interested in the farmer and all he had to tell them. He was able to tell them all about his fertilisers, how many machines he had, everything about the costs of working the farm, the crops he grew, and so on. He knew all about those things. Then they asked him how much profit he made. He did not know. So how the poor Income Tax inspector finds out from him what his profit is is more than I can understand.
§ Mr. Emrys Hughes (South Ayrshire)
Perhaps I can explain that. He may have thought that the Soviet delegates were Income Tax inspectors in disguise.
§ Mr. Woodburn
Perhaps that may have confused the calculations.
I had a friend who knew a farmer—this was before the war, when money was not so plentiful among the farming community—who was complaining he had lost £600 the year before. My friend could not understand how this came about, and then to his surprise he found that the farmer estimated that he had made only £1,400 and so had lost £600. So we can understand that the Income Tax inspectors have a problem in dealing with people who do not know what is happening to themselves.
However, I should like the Minister to tell us whether there is to be an increase in the inspectorate, because I think one of the best investments that this country can make is in having a sufficient inspectorate of taxes with sufficient time for the inspectors to do their job. It is a skilled job to study the returns of income made by some people. I used sometimes to study the returns of a number of people and, frankly, I was not able to understand them or how it was they made them.
For instance, I know what it costs to live in my own city. I know what it costs to live in my house. I see houses where nobody could possibly live at the amount of income those householders must have if the figures in their returns are correct. There are many people living at a standard above that which is their standard, judging by their Income Tax returns, if those returns are correct.
I am assuming that if there were a sufficient inspectorate the inspectors would be able to do much more work in helping people to make correct returns of income, and this would bring in a very much larger income to the country as a whole. It is legal to avoid Income Tax, and there are lawyers who earn their living by telling people how to avoid paying Income Tax. There are quite a number of people who lecture us on our public duty but who go to live in other countries for six months or more of the year to avoid doing their duty by paying their share of Income Tax. They draw huge incomes and lecture other people and then leave them to pay the taxes which maintain the Army, the Navy and the Air Force which protect us all. Not so much as should be is paid from their 409 handsome incomes for that. If the Inland Revenue authorities could get at some of the mean people who allow others to do their job for them by paying their taxes for them it would give a little more satisfaction to the public generally when they pay their taxes, and it would also bring in a larger amount of revenue to the Government.
I agree with what my hon. Friend the Member for Sowerby (Mr. Houghton) said about the Bill. He dealt efficiently with the Clauses and the actual administration, and I am quite sure that none of us could improve upon what he said. I agree entirely with what he said, that the confidence we shall have with this decentralisation will help the Income Tax inspectors and others in their work; and we hope that eventually it will bring to the Treasury a greater return, both in cash and in good will, than at present exists.
§ 4.56 p.m.
§ Mr. Rafton Pounder (Belfast, South)
I, too, would like to add my own personal welcome to the Bill. Any legislation which seeks, as the Bill does, to modernise the law relating to the machinery and procedures of Income Tax is assured of a favourable reception not only inside this House, but also among the tax-paving public outside.
I will go further and suggest that the Bill, which seeks to simplify the administrative provisions relating to the assessment and collection of Income Tax and Profits Tax, will not only have a favourable welcome, but will be welcomed with open arms. It will gladden the hearts of many of my fellow accountants to see the Bill on the Statute Book.
For many years the law and administrative processes surrounding Income Tax, and, indeed, Profits Tax, has been overburdened with a plethora of small, trivial technicalities. The hon. Gentleman the Member for Sowerby (Mr. Houghton) gave what was to my mind a fascinating and entertaining history of the origin of some of these trivialities. Many legal anomalies will remain, but some glaring administrative ones will be got rid of by the Bill. It is sufficiently difficult for the average taxpayer to comprehend the maze of Income Tax legislation without burdening him further with all the unneces- 410 sary administrative complexities which seem to go hand in hand with Income Tax law.
I say this not only as a taxpayer, but as an accountant, The extent to which the Bill will amend existing legislation—perhaps, spring clean would be a more descriptive phrase—is only fully appreciated, as the hon. Gentleman the Member for Sowerby mentioned, when we study the list in Schedule 6 of enactments being repealed. The aim of a good spring clean is, of course, to remove cobwebs—obsolescent, administrative cobwebs in this case.
Before turning to those parts of the Bill which I found to be particularly worthy of comment, there are one or two general observations which I should like to make. The transfer of the formal responsibility for making Income Tax assessments from the general or special commissioners to Inland Revenue officers is welcome, even if somewhat belated. On one point which my hon. Friend the Financial Secretary outlined about the age limit at which general commissioners must retire, the age of 75, although I appreciate that this will bring them into line with comparable posts, never[...]heless I should have thought there might be a case for reducing the age to 70.
The provisions contained in Clause 13 have attracted a good deal of comment. I was very surprised when I read the Clause, because I am forced to admit that ever since the days when I was an articled clerk, in an accountant's office in Belfast, I personally believed that the matters contained in the Clause were already law. I am relying on memory, but I feel quite convinced that the local inspectors of taxes with whom I used to deal worked on the principle that only that section of an assessment which was the subject of an appeal remained outstanding and that on which there was no disagreement was settled.
I wish to draw particular attention to Clauses 14 and 15, which relate to Northern Ireland. The Bill makes fairly far-reaching changes. As has been said, there are no general commissioners in Northern Ireland. This situation has a historical or gin. It was, if I remember aright, the Income Tax Act, 1918, which instituted the general commissioners, and in those years Northern Ireland had 411 other matters preoccupying its mind, and it was felt that locally appointed general commissioners could lead to difficulty in the circumstances then prevailing. However, I cannot help feeling that, 45 years or so later, the time has come to consider the appointment of general commissioners in Northern Ireland, and I regret that there is no such provision in the Bill.
The absence of general commissioners imposes an almost intolerable burden upon the special commissioners acting in Northern Ireland. To give the House an idea of what is involved, I shall list the duties falling upon these gentlemen, which, it will be remembered, are shared by general commissioners on this side of the water. Special commissioners in Northern Ireland make all the assessments. They hear every single appeal. They sign all the warrants for levying tax and determining claims for exemption. They deal with all the claims for abatement and repayment of tax. All this work has to be carried out during the course of two brief visits which the special commissioners make to Northern Ireland each year. If there were general commissioners who met more often and who were more readily accessible, the work load, I feel sure, would be much more evenly spread.
The outcome of the present situation, of course, is that many of the appeals which are lodged for hearing before the special commissioners are never even reached. How could they be on the basis of biannual visits into which so many other matters besides the hearing of appeals must be crowded?
Clause 14 is designed to reduce the number of avenues of appeal which are open to the Northern Ireland taxpayer, but, although my hon. Friend the Financial Secretary referred, I thought, with pleasure to a tidying up in this respect, I frankly admit that I regret what is proposed. To my mind, it is a retrograde step that cases against determinations of the special commissioners now have to go direct to the Court of Appeal instead of first to the High Court and thence to the Court of Appeal. I regard the omission of that step in the avenue of appeal as regrettable.
I am not altogether satisfied with the proposed alteration of the present 412 system whereby an appeal to the special commissioners can go for a rehearing by the recorder or county court judge. The existing system is now to be altered, with the right of election to appeal direct to the county court judge instead of to the special commissioners. Again, I am not altogether happy at the omission of this rather important step.
I draw one inference from the Bill with regard to the decisions of the recorder or county court judge, and I should be glad if my hon. Friend would confirm that my conclusion is correct. Previously, there has been no appeal against such decisions, whether on a question of fact or on a question of law. Now, I understand, a point of law can be the subject of appeal and the claimant, the appellant, can go to the Court of Appeal. If my deduction is correct, I regard this as a welcome provision.
None of the proposed changes in appeal procedure makes any move to overcome the major deterrent factor affecting many appellants. I submit that countless thousands of dissatisfied taxpayers and would-be appellants have been deterred by the cost of an appeal to the superior courts. However, I imagine that this is quite outside the framework of the Bill and that it will have to be a subject for another occasion.
To my mind, there are three criteria by which any Measure for the modernisation of our taxation system should be judged. First, will the Bill benefit the taxpayer in any way? Secondly, will it be unworkable for practising accountants? Thirdly, will it be of assistance in streamlining the administrative processes of the Inland Revenue?
Briefly, my answers to those questions are these. It seems very doubtful that the Bill will make any difference to the taxpayer, except, perhaps, the Northern Ireland appellant, and he, I cannot help feeling, is given a rather raw deal under the Bill. Secondly it seems that the work of the practising accountant will not be either complicated or alleviated in any way by the Bill. Thirdly, undoubtedly the Bill is of very substantial value in streamlining the work of the Inland Revenue.
In conclusion, may I ask my hon. Friend the Financial Secretary to give 413 fresh thought to the desirability of bringing Northern Ireland into line with the rest of the United Kingdom in the appointment and scope of duties of general commissioners.
§ 5.5 p.m.
§ Mr. E. G. Willis (Edinburgh, East)
I do not pretend to be an expert on Income Tax law. I find it very difficult to fill in my own forms and to understand the matter at all, and, in this respect, like my right hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Woodburn), I am greatly indebted to the inspector of taxes and his staff, who are always very helpful. I take this opportunity of paying tribute to them, based on my own personal experience both past and present.
The Bill relates to Scotland, of course, and I see the name of the Secretary of State on the back of it. There are one or two points of importance in the Scottish context which should be raised. As I understand it, the Bill makes no change in the appointment of general commissioners in Scotland, and I wonder whether this is a good thing. I am intrigued by Clause 1(3):General Commissioners for divisions in Scotland shall be appointed by, and shall hold office during the pleasure of, the appropriate local authority, but any such General Commissioner shall not be dismissed except with the consent in writing of the Lord President of the Court of Session.This seems to be something of a contradiction. If a general commissioner may not be dismissed without the consent of the Lord President of the Court of Session, it seems clear that the local authority cannot dismiss him. We have a rather similar situation in Scotland in regard to the assessor in local authorities, only in that case the consent has to come from the Secretary of State, not the Lord President of the Court of Session. Why should it be the Lord President of the Court of Session? I see neither rhyme nor reason in it.
Clause 1(4) provides thatIn Scotland a sheriff shall be ex officio a General Commissioner".I could understand this in the past, in more leisured days when sheriffs, by and large, were a leisurely class of people. But we are moving now into a time when the sheriff, and particularly the 414 salaried sheriff-substitute, who, also, is ex officio a general commissioner, is an exceedingly busy man. The salaried sheriff-substitute in Glasgow, Edinburgh, or any large town of Scotland has the whole of his time occupied in the work of the courts. I imagine that he would find it rather difficult to give to this job the time which shiuld be given.
This is why I wonder whether it is right not to reconsider the situation in Scotland as regards general commissioners and make changes in the set-up there. As I say, the provisions of Clause 1(4) relate to a time long passed. Contrary to what was said by my hon. Friend the Member for Sowerby (Mr. Houghton) about the Bill modernising our procedures, we are here hanging on to something which is quite out of date and out of accord with present circumstances in Scotland.
The same point occurs to me in connection with Clause 8, with which I agree. Subsection (4), which deals with Scotland and the raising of the amount which can be sued for in the sheriff court, is a good provision. It brings the law into line with recent legislation which put up the amount for which one can sue in the sheriff court to £250. I do not know what the position is in county courts in England, but I know the position in sheriff courts in Scotland. People in Scotland spend two, three and four weeks in prison because they cannot get a trial.
§ Mr. George Lawson (Motherwell)
We had a case in Edinburgh only last week in which a man spent 104 days in prison before being tried. He has now been tried after 110 days in prison, and this does not seem to be unusual.
§ Mr. Deputy-Speaker (Sir William Anstruther-Gray)
Order. It would be a mistake to go too far on that line in this debate.
§ Mr. Lawson
On a point of order. Is it not in order to discuss whether courts which are being given a duty under the Bill are likely to be able to carry out that duty?
§ Mr. Deputy-Speaker
Reference to the matter is quite in order as long as hon. Members do not go too far.
§ Mr. Willis
I am grateful for your guidance, Mr. Deputy-Speaker.
I was dealing with Clause 8(4), which states:In Scotland subsection (1) of this section shall not apply, but where the amount of income tax for the time being due and payable under any assessment does not exceed two hundred and fifty pounds the tax may, without prejudice to any other remedy, be sued for and recovered from the person charged therewith as a debt due to the Crown by proceedings commenced in the name of a collector of taxes in the sheriff court or in the sheriff's small debt court, whichever is appropriate.In Scotland, men are kept in prison because they cannot be brought before a court for trial. This extension in functions performed by the sheriff court is likely to prejudice that situation and make it worse.
I should like some information about this subsection. To what extent are cases likely to be taken to court under it? Will it be a handful or hundreds of cases? The larger the number, the greater will be the delay. A number of my hon. Friends have repeatedly raised something which has become a scandal in Glasgow, namely, the delay in cases being heard in sheriff courts.
I understand that the position of sheriffs and sheriff substitutes and of their functions and the procedures of the sheriff courts are being considered by a committee in Scotland. I am sorry that there is not a Scottish Minister here to deal with this matter. The attention of this committee should be drawn to Clause 8, so that it may take it into account when making recommendations. It would have been a good idea to draw the attention of the same committee to sheriffs being appointed ex officio general commissioners. It might be able to recommend whether this practice should be continued.
These are matters in the Bill with which I am concerned, and I feel that they should be the concern of one of the Scottish Ministers. They should be brought to the attention of the committee considering the functions and duties of sheriff substitutes so that it will have them in mind when making recommendations about the future of these bodies in Scotland.
§ 5.16 p.m.
§ Sir James Duncan (South Angus)
I too, welcome the Bill because it is a piece of streamlining which is entirely in line with Tory Party policy in the twentieth century. It has the advantage that it will cost no money because it deals with management and efficiency. It is more likely to save money than cost money. For those reasons, I welcome it.
I wish to raise only two points. First, I was a member of the Joint Select Committee of both Houses which was responsible for the consolidation of the Income Tax law which eventually emerged as the Income Tax Act, 1952. As is the habit of Joint Select Committees, an enormous amount of work was done on this Act. It has 532 Sections, making it, I think, the biggest Act on record, and 24 Schedules. We regarded a number of the provisions of the then law as spent. I am delighted to learn from my hon. Friend the Financial Secretary that he has discovered some more. We had long arguments about whether some of the provisions were spent, and some of them applied to Scotland.
I took the responsibility on at least one occasion of inducing my fellow Members to agree that some of the Scottish provisions were spent. More have now been discovered, and I am delighted to hear it. Some of the spent provisions arise from law made since 1952. Therefore, this process of modernisation is a continuous one which I commend.
My other point concerns something which I came up against some years ago. If one pays tax in advance, it is possible to get a discount. I think it reasonable that there should be a discount on tax paid in advance for various reasons. First, a man may have some money, say, in August, and, looking forward to the following March, or whenever he normally pays his Surtax, for instance, he may prefer to pay in advance what he would have to pay later and thus get a discount. Secondly, Surtax, in particular, is collected on income received two years beforehand.
A man's circumstances may be very different two years afterwards. For example, there might be a depression, as there was in 1930, when I was caught for income which I had received in 1928. 417 There might also be a Labour Government two years afterwards, in which case the value of money might have gone down. Those are the kind of circumstances that could arise.
§ Mr. Houghton
I thought that the hon. Member was going to refer to a number of Ministers who would lose their jobs and, as Surtax payers, might be in difficulties.
§ Sir J. Duncan
That is a further point. I agree that somebody who had been a Minister at the £5,000-a-year rate and had little other private income could be in serious difficulty. I see that the right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn) nods agreement. He has had experience of this. These are problems and it would be of advantage to the taxpayer to be allowed to pay tax in advance.
I have been trying to find the provision to that effect in the 1952 Act, but I have not succeeded. I should like to know from my hon. Friend the Financial Secretary whether there is a provision in law or whether it is purely an administrative convenience on the part of the Inland Revenue, because I should like it to be put on to the Statute Book in the Bill. I do not think that it is included in the Bill, although I have tried to study the part of it which deals with minor and consequential amendments of the law.
Unless a person pays the whole of his tax due in advance, he cannot get a deduction. He cannot get a deduction if he pays only in part. This leads to the difficulty that one does not know in August what will be one's total tax liability which may be demanded in January and, perhaps, payable in March, or much later if there is any argument as to the total liability. Therefore, it is not possible to take advantage of the discount which would be available to a person who knew his total tax liability.
This is a slightly complicated affair, but I hope that my hon. Friend will look into it for the benefit of the taxpayer, for the benefit of his hon. Friend the Economic Secretary and for the benefit of the Inland Revenue, too, because it would be of great advantage to the Inland Revenue, who would get the 418 money in advance. The discount would be, say, ½ per cent. below Bank Rate; the rate of interest is not a matter of great importance. The Treasury would not lose, because it would get the money earlier than otherwise would be the case.
If my hon. Friend regards this as a good idea I hope that he will not leave it to the whims of the Inland Revenue, but will state definitely that tax paid in advance for, say, one year or two years could be made subject to a discount at the rate of ½ per cent. below Bank Rate.
§ 5.24 p.m.
§ Mr. George Lawson (Motherwell)
The hon. Member for South Angus (Sir J. Duncan) has rather surprised me. Speaking as a representative of a Scottish constituency, he seems to be a little out of character. If we are to be considered according to our national character, i[...] is not very often that we from Scotland wish to pay in advance.
§ Mr. Lawson
It is not one of the difficulties with which I have been confronted. Usually, the people who come to me do so because they have paid in advance and they have paid more by the P.A.Y.E. method than their current earnings justify, and their claim is that they should get something back. If, however, the idea is a good one, and the Income Tax authorities are prepared to try to operate it, I am sure that we from Scotland would be happy to help them as far as we can.
Like my hon. Friend the Member for Edinburgh, East (Mr. Willis), I am concerned that as little trouble as possible should be offered to the Inland Revenue. I appreciate that very often its task is difficulty. When I saw how this Measure was being implemented concerning Scotland, and I had the matter drawn to my attention by my hon. Friend the Member for Edinburgh, East, I thought that, in spite of all that seems to have been in the mind of my hon. Friend the Member for Sowerby (Mr. Houghton), this step was, being taken without the position having been properly studied.
In taking the decision to add to the responsibilities of the sheriff courts in Scotland, was there really a study of 419 the existing situation concerning those sheriff courts? I would not blame anybody in the Inland Revenue if he did not know of the existing position. In fact, the Secretary of State for Scotland did not know, or does not seem to have known, of the position as it existed in these sheriff courts, because great astonishment was expressed by the Secretary of State only the other week when he discovered how many people were being held in prison in Scotland before trial, for how long they were held in prison and how many of them subsequently were found not to be guilty.
The point which I put in all seriousness to the Financial Secretary to the Treasury is that according to the information that comes to us, those courts are so burdened that there is an ever-lengthening queue of people coming forward for trial. I need only mention an article which appeared in the Guardian on 3rd February. The Guardian does not usually refer much to Scottish affairs, but it had a special article on the question of the queue of people at the sheriff courts. Speaking of the difficulties, it said:It seems that the present situation stems from the system of accused persons appearing before magistrates' courts on charges outside the courts' powers and, once remanded, the accused then became part of the ever-lengthening queue of people awaiting their turn to go before the sheriff.When adopting these measures, did the Minister know of this situation in Scotland? This is a matter of concern to us. We want the conduct of matters of this kind in Scotland to be made as easy as possible. We certainly would have no objection to this type of case, for these relatively small sums which the Inland Revenue wishes to recover, being taken to the sheriff courts.
Has any thought been given, however, to what will happen if the circumstances remain as they are? Or has the Treasury been given advice that radical measures of improvement are about to be carried out in those sheriff courts, which has led the Treasury to believe that since radical improvements are being undertaken it will be possible easily for the work that it is desired to carry out to be taken to these courts and dealt with expeditiously?
420 Unless some assurance has been given, the Treasury should hold its hand and suspend this part of the Bill to ensure that already overburdened courts will not be still more burdened.
§ Mr. Lawson
The Bill extends the scope after £250. We welcome this provision. We are merely drawing attention to the great difficulties under which some at least of our courts are labouring. Those difficulties are such that the courts appear unable to cope with their work. I am sure that many hon. Members must have had complaints of proceedings before the sheriff courts where witnesses have been kept waiting for a whole day and then sent home because cases have not been reached.
Far be it from me to add to the difficulties, but I want to ensure that the Inland Revenue does not make things worse. I simply caution it to find out, before it goes ahead with this Bill, whether improvements are being made and whether or not its business can be carried out expeditiously. Given that assurance, I am sure that we would welcome fully these provisions.
§ 5.31 p.m.
§ Mr. John Rankin (Glasgow, Govan)
We are told in the Explanatory and Financial Memorandum to that Bill that its main purpose…is to transfer formal responsibility for the making of Income Tax assessments from the General or Special Commissioners to Inland Revenue officers (in the main, to inspectors of taxes)".Of course, that attracted me because, as a member of Sub-Committee C of the Estimates Committee, I spent much time during one Session going into most aspects of the Inland Revenue. I believe that the Financial Secretary was Chairman of the Sub-Committee at the time.
§ Mr. Rankin
Then he will recollect the large number of witnesses and will agree, I think, that the work that that Sub-Committee did under his chairmanship was very efficient. I am not merely saying a word for him but for the Sub-Committee as a whole. The Bill gives effect to a recommendation of the Sub-Committee. If the mills of God grind 421 somewhat slowly, evidently they have at least ground with a certain amount of surety in this case. On that account, I welcome the Bill.
The hon. Member for South Angus (Sir J. Duncan) said that this is modernising and streamlining the methods by which the Government take money from the people and the machinery that enables the taxpayers to get some of it back if they deserve it. The test of the Measure's effectiveness will be how far it makes the individual aware of the complexities that presently surround the infliction of Income Tax.
Those complexities are very great—so great that many people give up in despair any attempt to fill in their Income Tax forms. Instead, they hand them over to chartered accountants. It is alleged that, by so doing, they achieve the aim which my right hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Woodburn) has pointed out is achieved by others—they dodge, or are alleged to dodge, some taxation by the use of high finance. The accountant charges some of the dues which the clients legally owe to the Inland Revenue.
How much truth is in that, I do not know. I trust the Inland Revenue. Every year, when my statement comes back it contains sections for "overpaid" or "underpaid". How the figures put opposite those words are reached I do not know. But this year, for the first time in many years, opposite the word "overpaid" a very substantial sum was indicated.
At first, as in former years, I merely put the statement away. Then, on second thoughts, I had another look and realised that for the first time in ten years the Inland Revenue owed me money. I promptly filled in the form and sent it last Thursday. Now I am waiting from day to day for what is owed to me.
§ Mr. Rankin
No. There will be no dinner. A Scotsman never squanders money which comes unexpectedly. It will go to something, but not to other people's stomachs.
As I have said, I put my trust in the Inland Revenue. I depend upon it. 422 In days when I underpaid it was different.
§ Mr. Rankin
I am keeping to the narrow path of order. I do not want to embark on wide digressions that might bring me into conflict with the Chair. In days when I had underpaid tax, I tried to find out why. I was behaving exactly in those days as I am still behaving. I got replies—five-sixths for this fraction and seven-eighths for another, etc. I am sure that all hon. Members have had the same. People who can make head or tail of these replies are in scarce supply. Perhaps I should have gone to a chartered accountant and paid him to find out what it all meant, because I was as wise at the end as to how and why I had underpaid taxation as I was when I started on that perilous adventure. Despite that, I still put my faith in the Inland Revenue officers. Last week it was rewarded. Long may that situation continue. They can reward me next year if they like. I shall not spurn that reward.
The whole test of the modernisation and streamlining that is incorporated in the Bill will be the degree to which the processes of the Inland Revenue Department are made intelligible to the ordinary individual in the street. They are not very intelligible to Members of Parliament. My right hon. Friend the Member for East Stirlingshire referred to instances which have occurred in the town which he honours by residing in. He talked of people living in homes which apparently could not be easily maintained out of the incomes declared. In the course of the investigation that the Estimates subcommittee conducted we inquired closely into these allegations of misstatements, and from those upon whom we must rely we heard that although some money seemed to leak away the practice of giving misleading information was not widely engaged in.
That fact was driven home to me last week, when one of my hon. Friends told me that he had received a note from Cardiff saying that he had forgotten to include in his return on income a sum which was so small that it had 423 entirely escaped his attention. Cardiff had not overlooked it. There is a little angel watching over us in this Chamber, and he keeps a very close eye upon us. Nothing seems to get past him, not even little sums which we can be forgiven for forgetting about at times.
Balancing that against what my right hon. Friend said provides another aspect of the wonderful manner in which this powerful organisation works. It is a powerful organisation, which holds very closely in its hands, and keeps a very tight grip upon, that important section of the community which keeps things going by emptying its own pockets. The work of the Sub-Committee fortifies me in saying that the people who get away with it are very few in number.
I am sorry that the knight from South Angus is running away. I wanted to say a word to him. He suggested that we might pay in advance. It is easy for farmers to suggest that; they are paid in advance. This year the farming community will be receiving about £3,800,000. I forecast that from what I have read. My hon. Friend seems to doubt that figure.
§ Mr. Rankin
It is not for me to invite the Chair to be patient with me, but I do ask for a little patience, Mr. Deputy-Speaker. My remarks will be very pertinent. I should have said that an increase of about £3,800,000 is expected for the farmers. It is easy enough for them to talk about paying in advance. The great mass of our people could not pay in advance simply because the ability to pay in advance means the existence of security of employment, which is totally lacking under this Government, especially in Scotland. Few people working in Scottish engineering shops and shipbuilding yards can depend on still being in work at the end of the week. There is no security of employment, and if there is to be payment in advance there has to be such security. The fact that unemployment still lingers round about the 100,000 mark is proof of what I say.
424 I support all that my hon. Friend the Member for Edinburgh, East (Mr. Willis) and my hon. Friend the Member for Motherwell (Mr. Lawson) said about the functions of the office of sheriff-substitute. Everybody in Glasgow knows that the courts over which sheriff-substitutes preside are overwhelmed with work. It may be true that this has been part and parcel of the situation since 1952, but the work done in sheriff courts today is much greater than was the case in that year. We were talking about streamlining. It might have been possible to streamline that apparatus in the Bill.
It would be helpful if the Financial Secretary could give us some idea of the amount of work that is presently thrown on to the sheriff-substitute in the execution of his duty. It might not be a great deal; it might be much more than we imagine. If it has any significance we ought to draw attention to the fact that more work is being placed on the shoulders of these officers, under the Bill, than presently exists, and that it is being put on to him at a time when he already has more work to do than he can accomplish within reasonable limits. I hope that the Financial Secretary will give us more information on this part of the Bill.
§ 5.50 p.m.
§ Mr. Cyril Bence (Dunbartonshire, East)
I wish to ask a question about subsections (4) and (6) of Clause 1. I may be wrong, but I understand that a sheriff can practise at the Bar outside his sheriffdom. A sheriff who becomes, ex officio, a general commissioner could practise at the Bar outside his sheriffdom while the commissioner of a division. The division may be wholly or partly within his sheriffdom. If part of the division is outside the sheriffdom the sheriff could act as a lawyer on behalf of a taxpayer or of the Inland Revenue in that area. He could be an assessor or an advocate for or against in that part of his division outside the sheriffdom.
It seems to me that the position is made worse by the provisions of subsection (6). The Secretary of State for Scotland may, by order, create a new division or abolish an existing division. A situation in which a division of which a sheriff was a commissioner was wholly within his sheriffdom could be altered, and the division extended outside the 425 area of the sheriffdom. It might include a tremendous industrial area in which the sheriff would be permitted to practise at the Bar. Subsections (4) and (6) seem dangerous. I consider that they are wrongly drawn and could result in a frightful situation being created. It seems contrary to the general practice in our society.
I agree wholeheartedly with the points which were made by my hon. Friends about the pressure which is being put on sheriffs by reason of the extra work which they will have to do. I understand that the sheriff substitute is a permanent appointment because ex officio he is a commissioner but the sheriff's appointment is part-time because he practices at the Bar. I shall wait hopefully—to use the term which Robert Louis Stevenson used—for a Law Officer to attend this debate and answer my question. I wish to be satisfied that I have interpreted the provisions in the Bill correctly. If I have, I hope that there will be an Amendment designed to change the situation.
§ 5.55 p.m.
§ Mr. Green
With the leave of the House, I will try to answer some of the points which have been raised.
I understand that the work of the sheriff as a Commissioner is small in amount and will not increase. There is remarkably little prospect of this work growing in volume at all. I think that answers most of the points that falls to me to answer because, like other hon. Members who have spoken about the situation in Scotland, I have to be careful to keep within the rules of order.
§ Mr. Willis
Will the hon. Gentleman draw the attention of the Scottish Minister to the points which have been raised in order that they can be conveyed to the Committee at present considering the operations of sheriff courts?
§ Mr. Lawson rose—426
§ Mr. Lawson
No. I wish to refer precisely to the point made by the hon. Gentleman that the work of the sheriff is not likely to be great. But there are courts where there are a long queue of cases to be dealt with and some may take a long time to reach unless there is to be queue jumping. I do not think the Treasury would wish to do that. If the courts are so overburdened, as would appear to be the case, it seems that sheriffs may be asked to do work which they could not reasonably be expected to do.
§ Mr. Green
The hon. Member will, of course, have noticed the wording of Clause 8(4)in Scotland subsection (1) of this section shall not apply, but where the amount of income tax for the time being due and payable under any assessment does not exceed two hundred and fifty pounds the tax may, without prejudice to any other remedy, be sued for…etc. One does not propose an instrument which is not available for use. I think that is the short answer to the hon. Gentleman.
The determination of points made about Scotland are outside my responsibility, but, of course, the Secretary of State for Scotland will note them. He will read the OFFICIAL REPORT of this debate. I have answered the point which falls to me to answer. I was asked how much more work was expected to [...]all on the sheriffs, and my information is that it will be a very small amount.
I trust that the point raised by the hon. Member for Dunbartonshire East (Mr. Bence) is not a material one. But I will, of course, look at it. The sheriff is an ex officio general commissioner. We have suggested the sheriff as an ex officio commissioner because there will be occasions when his personal and legal experience will be valuable.
One or two of the other points regarding Scotland would be better discussed in Committee, and I am fortified in that opinion because an hon. Member opposite has described the subsection as being very good. My hon. Friend the Member for South Angus (Sir J. Duncan) referred to the prepayment of tax and the receipt of some discount. This Bill is not concerned with any changes in tax charged, either up or down. Certainly no hon. Member would expect that at this time 427 of the year I would start to throw out hints about any such changes. But I can draw the attention of my hon. Friend to the fact that there are such things as tax reserve certificates on which tax-free interest is paid.
§ Sir J. Duncan
In the latter part of his speech, my hon. Friend referred to consequential amendments which have been made to the law. I want my hon. Friend to look at whether one can be added to meet the important point which I made.
§ Mr. Green
I cannot include anything which affects revenue. There is already in existence means for rewarding those why pay tax in advance.
My hon. Friend the Member for Belfast, South (Mr. Pounder) raised one or two specifically Northern Ireland points. The best assurance that I can give him is that we had very prolonged and thorough discussions, as might be expected, both with the Government of Northern Ireland and professional bodies over there. Clauses 14 and 15 are the product of those discussions. I hope that when my hon. Friend thinks about it he will accept that assurance.
On the specific point he raised about right of appeal, I think Clause 15 (4) answers the question. That subsection says:Within thirty days after the determination by the county court of proceedings brought under this section any party to the proceedings may require the court to state a case on a point of law for the opinion of the Court of Appeal in Northern Ireland.There is an appeal on a point of law. That was what my hon. Friend wanted to know.
The right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn) wanted to know whether we thought the staff of the Inspectorate was adequate. We think it is. I am sure the right hon. Member would agree that to have extra inspectors, so to speak, merely in order to have extra numbers would not be sensible.
§ Mr. Houghton
Will the hon. Gentleman kindly take it from me that there is not the remotest chance of the Inland Revenue ever having more inspectors for the sake of having more inspectors?
§ Mr. Green
The hon. Member for Sowerby (Mr. Houghton), who has been so extremely agreeable during the whole debate, need not say that, because I was about to state exactly that myself. We are in such complete agreement that I do not think we need pretend to be in any contest about it. The point is to have an adequate staff. We are satisfied that to have anything else would be costly, cumbersome and wasteful. If we had too few it would be costly, and if we had too many it would be cumbersome and wasteful.
§ Mr. Woodburn
The point I was trying to make was that if the staff was not adequate—and I understand that there is always a back-log and pressure on the staff—it is a good investment, not a cost to the nation, to have the job done properly, because this is one Department in which the Government can earn more income.
§ Mr. Green
I entirely agree that the proof of the pudding is in the administrative cost. I do not think the right hon. Member and I are in disagreement. We note the point he has made and we shall seek to get this adequately serviced.
My hon. Friend the Member for Bristol, North-East (Mr. Hopkins) asked whether decentralisation of Surtax is being seriously considered. The answer is, "Yes, it is". I repeat that an official decision on this should be taken on strictly administrative grounds. He can be absolutely assured that this point is being seriously considered and until a decision is taken it will go on being very actively and seriously considered.
In answer to the other point my hon. Friend made, the Board of Inland Revenue is as anxious as anyone to get its forms as simple, accurate and clear as possible. It has a genuine interest which matches the taxpayers' interest in terms of getting information in the simplest, clearest form possible, because the clearer and simpler the forms can be the less trouble there is for inspectors and other members of the Inland Revenue to explain and to waste their time and everyone's time. This is constantly being looked at. The only point about which one has to be careful, as I am sure my hon. Friend on reflection 429 will agree, is that Income Tax is governed by law and it has to be very precisely stated.
Quite often, there is a conflict between what one might term layman's language and the necessary legal definitions of what has to be done and what will stand up in a court of law and court of appeal if a case goes to appeal. That is the main difficulty in making in laymen's terms all forms as simple as we would desire them to be. Nevertheless, great efforts are being made to simplify the forms, I think with some success. Obviously it is of interest to the Inland Revenue to carry the process forward as far and as fast as can be done. That is in the general interest of the Board as well as of the taxpayer, so it is very unlikely that anyone will have to wait forty-three years for the burden of proof.
I am grateful to the hon. Member for Sowerby for the welcome he has given to the Bill and for the tribute he paid to the work done by the Inland Revenue. The Inland Revenue certainly deserves that tribute. He has had a lifelong interest in this subject, and I listened with great fascination to his description of its history. It was extremely worth while to have it delivered and to put it on the record. It was thoroughly interesting, and at times amusing. I am glad to know that the B.B.C. continues to have the good sense to employ his knowledge and talents on the programme he mentioned. I extend to him my good wishes that he can go on doing that work for many years.
As he will know, the Board of Inland Revenue is very keen to get this Bill. It has wanted it for some time and I am sure I am speaking for the Board when I say that its members will be grateful to the House today for the warm welcome so far given to the Bill and for the cooperative way in which the debate has been conducted. I hope the House may now be willing to give the Bill a Second Reading.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).