§ Question proposed, That the Clause stand part of the Bill.
§ Mrs. Thatcher
I find this a complicated Clause, and I hope that the Financial Secretary will read one of those expositions after which all becomes clear.
This Clause, entitled "Personal reliefs for non-residents", is tied up with certain other Clauses in the Income Tax Act, and if the hon. and learned Gentleman would listen to me for a moment he might tutor me and tell me whether I have the meaning of the Clause right.
As I understand it, certain nonresidents are entitled to personal reliefs on that part of their income which arises in the United Kingdom. The reliefs to which they are entitled are in the same proportion that the United Kingdom income bears to their total income, but there are certain difficulties in calculating the United Kingdom income and total income particularly where there is a double taxation agreement in force, and where that double taxation agreement provides for a low withholding tax on dividends.
If I have it right, the recipient of the dividends cannot have both allowances and a low rate of withholding tax on the same portion of income. That is to say, the United Kingdom income will be calculated without reference to the dividends which go out, and therefore his personal allowances will follow the proportion which the United Kingdom income bears to the total income, but the dividends will be disregarded for calculating the personal reliefs.
I hope that that is more or less right. If it is, I think that we can perhaps let the Clause go through fairly quickly.
§ Mr. MacDermot
The hon. Lady is right, and so I am spared having to read a much lengthier and far less lucid exposition of the Clause.
As I understand it—and I am putting it in my own words, and not in the learned words with which I have been supplied—the effect of the Clause is to separate the income which is subject to the limited rate under the double taxation agreement from the rest of the income. For the rest of the income the 143 overall rate of tax on the United Kingdom income is to be what it would have been in the absence of relief provided by the double taxation agreement, and for the rest of it, that which is subject to the double taxation agreement—and this is the only point that I really want to make—the taxpayer will have an election either to have the rate of taxation on those dividends which is provided for by the double taxation agreement, or the overall rate, whichever is the smaller, so there is an election on that point.
§ Question put and agreed to.
§ Clause ordered to stand part of the Bill.