Pensioners (PAYE)

HC Deb 18 December 1975 vol 902 cc1635-6

12. Mr. Richard Wainwright

asked the Chancellor of the Exchequer whether, in respect of State pensioners without employment, he will require Government Departments to operate PAYE procedure in order to spare pensioners the procedure of direct assessment to income tax.

Mr. Denzil Davies

The arrangements for paying State pensioners differ in a number of important respects from the arrangements under which wages, salaries and occupational pensions are normally paid, and they do not readily lend themselves to the operation of PAYE. Consideration is currently being given to the possibility of devising a scheme for deduction of tax under PAYE from State pensions, including those where a direct assessment to tax on the pension would otherwise be necessary.

Mr. Wainwright

Will the hon. Gentleman undertake that the inquiry will go ahead and be implemented with all possible speed? Is he aware that, as a result of the abominable way in which income tax falls upon low incomes at present, people who are in receipt only of pensions not only have them taxed, but have all the worry and anxiety of receiving a sheaf of forms to which they have never been subject in their lives?

Mr. Davies

I entirely accept that there is a problem. The Inland Revenue calculates that 200,000 out of the 2½ million people who have to be taxed in respect of pensions and other income suffer from direct assessment. The majority are retired people with fairly large investment incomes. Despite that, it is a problem, and the Inland Revenue is putting into operation an extended instalment scheme whereby tax can be paid by more than four instalments during the year.

Mr. Carter-Jones

Does my hon. Friend agree that if an income tax debt arises through no fault of the pensioner, the Inland Revenue should be kind and dismiss it?

Mr. Davies

The Inland Revenue tries hard to be kind, and I think that in most circumstances it is. The normal arrangement is to pay by four instalments in the year. As I said, we are considering a scheme whereby tax can be paid more often, and therefore with smaller sums in each instalment.