§ *THE EARL OF PORTSMOUTH rose to call attention to the directions required in filling in particulars of income for Super-Tax; and to ask His Majesty's Government on what ground of law and equity they justify these directions.
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The noble Earl said: My Lords, in putting this Question to my noble friend who represents the Treasury in this House I think the shortest and best course for me to take to bring the matter as clearly as lies in my power before your Lordships is to refer you in the first place to the Income Tax Act of 1842, upon which all subsequent amendments of the Income Tax have been based. Under Section 124 of the Act of 1842 it is provided in the case of any one who makes a claim for exemption from Income Tax that a declaration so made shall be—and I wish to call your Lordships' attention to these words—
in such form as may be provided under the authority of this Act declaring and setting forth therein all the particular sources from whence the income shall arise and the particular amount arising from each source.
Those are the words in the Act of 1842, and any one who has studied the last Finance Act will be struck by the fact that in a great many cases for the purposes of convenience the Act of 1842 is referred to as the governing principle to be followed. It rather emphasises my point, that being so, that when you come to Section 72 of the Finance Act of 1910, which deals with this question of the form of
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the return of Super-Tax, these words are inserted—
Every person upon whom notice is served in manner prescribed by regulations under this section by the Special Commissioners requiring him to make a return of his total income from all sources,
and so on. If it had been the intention of Parliament that such a Return should involve the very elaborate and minute directions which have now been issued by the Treasury, nothing would have been easier than to have inserted in the Act a requirement that, instead of a return "of his total income from all sources," he should make a return setting forth all the particular sources from whence his income arose and the particular amount arising from each source.
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Speaking, of course, as a layman, it does not seem to me to be the intention of Parliament, having regard to this subsection, that those who make a return for Super-Tax should make any other return than a total return from all sources. In the notice which is sent round in regard to returns for Super-Tax it is specified that particulars of income from trade, property, ownership or occupation of land, bank and other interests, and the wife's income must be given. Now, my Lords, I maintain that if any one honestly makes a return of the totals under those heads he is fulfilling the requirements of the Act of Parliament, and I want to ask my noble friend how, under Section 72, you are going to subject to any penalty a person who makes a return as regards totals but declines to make the very elaborate return required by the Commissioners. Subsection (4) of Section 72 says—
If any person without reasonable excuse fails to make any return or to give any notice required by this section, he shall be liable to a penalty not exceeding fifty pounds.
Of course, a person would have made a return; he would not have failed to make a return.
§ Then if you turn to subsection (5) you will find that it says that if a person fails to make a return under the section or if the Special Commissioners are not satisfied with the return—that is to say, if they consider the return is a dishonest and improper one, and not a return giving a full statement of his income—they are to have the power of making an assessment of the Super-Tax according to the best of their judgment. I do not complain now 330 of that power, but what I say is this. I will take it that I or any member of your Lordships' House make a return giving our total income under the different heads. That return, we will suppose, is not accepted by the Somerset House authorities, who say they consider that we have made an insufficient return. What is the course to be gone through? First, the Special Commissioners in that case assess our income at what they consider to be its real amount. We then say that that is not so, and we appeal from the Special Commissioners to the General Commissioners. I presume that the person who is obliged to appeal cannot be liable to a fine before the matter has been settled by the General Commissioners. But what would happen in that case I What I presume would happen—and it does not seem to me to be an unfair arrangement—would be that the person against whom the charge was made that his return was an insufficient one would be liable to have his books and his accounts examined and searched, exactly the same power as is now possessed under the Income Tax Act of 1842 in the case of persons who are claiming for an exemption of Income Tax. In that case I presume the Commissioners would send down and look into the matter themselves, and I, for one, should not have the slightest objection, if it was considered necessary, to submit to a full investigation of that kind. But that is a totally different thing from obliging everybody every year to make a most elaborate statement of the most minute details regarding each particular item of property, and that is what seems to me most unfair and inequitable. Subsection (8) of Section 72 says that the Commissioners may make regulations for the purpose of carrying the section into effect. But surely that only gives the Commissioners power to make regulations to give effect to the purport and the purpose contained in the section. It does not give them power to make regulations outside the intention of Parliament. Therefore the first contention I wish to submit to your Lordships is that as a matter of law it does not seem to me that the Commissioners have the right, under Section 72 of the Finance Act, to require more than a general statement of the totals.
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But it is not merely a question of law; it is a question of common sense. I
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should like to call your Lordships' attention in a very few words to what a person is asked to do. The direction runs as follows—
If any part of the total income arises from the ownership of land, tenements, or hereditaments, state the precise situation of each property.
§ I should like to know what the Commissioners mean by asking for the precise situation of each property to be stated. Would the number in the street be sufficient? Or what do they mean by the words "the precise situation of each property"? Does it mean that they must be furnished with elaborate maps, or what? Then the direction goes on to say that the name of the occupier must be given. With the very best intentions in the world I really do not see how it is practicable for an owner of property let to weekly tenants to give the names when the occupiers are changing perhaps from week to week.
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Then, again, take another case of property in towns, especially in large cities, let to a tenant. The tenant sub-lets the house under his lease to a lot of other tenants for chambers. Is it possible in that case for the person who makes the return, the owner of the chambers, to give a precise list of all the people occupying the chambers who are sub-tenants of a tenant of his? The only person he has to deal with is the person who pays him the rent. Let me mention one more point. The direction goes on to say—
If a ground rent, mortgage interest, or other annual charge is payable on any of the property, particulars thereof should be stated
in a certain form. That seems to me to show a most extraordinary disregard or ignorance of the system under which a great deal of property is held in large cities. I, and I have no doubt many of your Lordships also, happen to be an owner of town property. What happens is this. A builder comes to me as the ground landlord and says, "If you will grant me a lease of eighty years I will erect. a suitable building upon that land." After I have done that, I know nothing whatever as to what the builder does with regard to his financial operations. The constant habit, of course, is for the builder, upon the security of the lease, to borrow a certain sum of money with which he builds his house, and he again creates a charge to another tenant under him, and so on ad infinitum.
§ One of the points which was very strongly urged in the course of the discussion upon the Finance Bill in the House of Commons was that these returns were no longer to be considered confidential. It is obvious that the owner cannot give this statement about the mortgage interests. He knows nothing about what the builder does, and I do not believe the builder would give the figures, because it might interfere to a certain extent with his credit. Those are the main points which I wish to impress upon my noble friend; and as there is considerable doubt among great legal authorities as to the right of the Commissioners of Inland Revenue to ask for all these details, I would ask him whether, supposing the Treasury maintains the view that they can insist on these details, they would object to have a case stated for the decision of the High Court.
LORD DENMANMy Lords, I think there is no doubt whatever with regard to the legal position of the Treasury in this matter. They ground their case on Section 72, subsection (2), of the Finance Act of last year, to which the noble Earl has himself referred. I read out the words in this House on a recent occasion in answer to a Question from the noble Earl, Lord Camperdown, on this very point. I would ask the noble Earl to look at the end of that subsection, which says that every person shall, whether he is or is not chargeable with the Super-Tax, make such a return in the form and within the time required by the notice. In addition to that, I would refer the noble Earl to Section 164 of the Act of 1842. He quoted the Act, but not the section. I would ask the noble Earl to read that section in conjunction with Section 66, subsection (2), of the Finance Act of last year. I do not think I should be giving much further information to the House by reading those sections, but I am informed that there is no doubt of the legal position of the Treasury in this matter.
Then the noble Earl asks on what authority the Treasury would in certain cases impose certain penalties. I am afraid I am unable to give the noble Earl the exact reference in the Act, but I have no doubt that the legal position of the Government in this matter also is perfectly sound. Then there is another point which has not been referred to by the noble Earl to-night, but which has been raised in this House more than once, as to which, 333 as it is not irrelevant to the question, I should like to be allowed to give a little explanation to the House. Exception has been taken by several noble Lords that these particulars are unnecessary on the ground that they are already in the possession of surveyors of taxes in the various localities. If the House will allow me, I would make one or two remarks on this point. Surveyors of taxes are not concerned with, and do not know the ultimate recipients of, ground rents, feu duties, fee-farm rents, royalties, easements, way-leaves, and other matters of that kind. Accordingly it would not be possible for them to give any certificate either in gross or detail which would cover income of this character. Secondly, a surveyor's certificate would not extend to cases of partial ownership, or of a, share in a trust estate; and thirdly, with regard to rents other than those which I have just specified, except in the ease of properties in which the landlord pays direct to the collector the Schedule A assessed upon his tenants, Income Tax is paid in the first instance by the tenant and is ultimately borne by the landlord by way of reduction from the rent. In these cases the statement that surveyors have complete information in a readily available form is not a correct one. As a matter of fact, surveyors of taxes would have to ask for just the same information as the Super-Tax Commissioners have asked for, and their difficulties would be increased by the fact that estates are situated in different parishes and different surveyors of taxes would have to collate the different information with regard to one estate, which would be a very difficult matter.
There is one point where a relaxation of the regulations is to be allowed by the Treasury. Where the landlord pays direct to the collectors the Schedule A assessed upon his tenants, the demand note for the Income-Tax would presumably have attached to it lists giving particulars of the properties, and if the landlord was prepared to send up for the retention of the Government these lists for 1908 and 1909, accompanied by the demand note, we would accept them as sufficient evidence with regard to the property specified, whether farm lands or allotments. I think the fact that we have made this concession will show your Lordships that we have endeavoured to meet some of the objections which have been raised in this House by my noble friend Lord Onslow and by Lord Heneage 334 and other noble Lords. I agree that the filling up of the forms asked for by the Super-Tax Commissioners is a rather irksome business, but, as was said by the noble Earl the Leader of the House, the Government were really in this position—either they had to ask for very detailed information or for practically no information at all, relying absolutely upon the word of the individual. Of course, there is bound to be, in setting up a new tax of this kind, a certain amount of friction and a certain amount of creaking of the machinery in the first instance, bat it is the desire of the Government to avoid giving any unnecessary trouble to people who have to make this return. There was one point on which, I think, the noble Earl was not quite correct. He anticipated that this very detailed return would have to be made up and furnished year after year. I think that is not so. I cannot make an absolutely definite statement, but it is very unlikely that anything like such a detailed return will be required again from owners of estates or people liable to the Super-Tax. There are other ways in which we have endeavoured to ease the regulations with regard to the information asked for. For instance, the Super-Tax Commissioners, with regard to estates in Scotland, have accepted a copy of the valuation roll and a summary of the totals as sufficient for their purpose with regard to landed estates in Scotland. And in England many people have sent in copies of their rent roll, and that with a summary of the totals, has in many cases been sufficient to give the Super-Tax Commissioners all the information they require.
§ THE EARL OF PORTSMOUTHIt would facilitate matters if my noble friend could say that it is not necessary to make a detailed statement of each property and each house such as is required in the directions.
LORD DENMANI think that is necessary; but the information is furnished in many cases in the rent roll of the particular property. The noble Earl has raised several points of detail and stated several particular cases. I am afraid 1 must ask him either to give me notice of those particular questions, or, what perhaps would be the better way, if they are, as I think he mentioned, cases that affect his own property, to communicate direct with the Super-Tax Commissioners. He will find them always 335 ready to give any information that may be desired. The noble Earl appears to think that it is an extremely inequitable proceeding on the part of the Government to ask for all these details and this voluminous information. As against that I am in a position to state the opinion of a noble Lord who sits in the same quarter of the House as the noble Earl himself—Lord Faber—who, as your Lordships may remember, spoke strongly against the Finance Bill of last year, and, if I recollect rightly, against the Super-Tax, but who is of opinion that now the Finance Bill has become law and the Super-Tax part of the machinery of raising revenue, it is not unreasonable for the Government to ask for the details which have been demanded.
§ VISCOUNT ST. ALDWYNMy Lords, perhaps my experience at the Treasury may justify me in detaining your Lordships for a few minutes on this subject. My noble friend raised, in the first place, the question of the legality of the procedure of the Super-Tax Commissioners in calling for such a detailed return as they have called for in the paper that has been sent to various persons whom they suppose to be chargeable with the Super-Tax. He has quoted the words of the Act of 1842, and has shown that they are different from the words of the Act of this year. But I think the noble Lord who has just sat down has fairly answered that by referring to Section 72 of the Act of the present year as empowering the Commissioners to ask for practically whatever particulars they may choose to require. I may add that I do not think they could have condensed their inquiries under fewer heads than the five heads which appear in the return of total income which has to be made. But I think there is still something required with reference to head B of that form—namely, the particulars of income from property. According to what has been stated a return of each house, or something like that—a very minute return—is required to be made; but this evening the noble Lord who has just sat down said that there would be some change made in that respect. If I understood him rightly, he said that where an Income Taxpayer could produce the demand note for the year 1908–9, the items on that demand note would be taken as representing the return which he should make, so that no more details would be required from him under such heads.
§ VISCUONT ST. ALDWYNQuite so. I am thinking of property assessed under Schedule A. But the demand note for 1908–9 is dated some time ago, and I suspect that very many Income Tax payers on property under Schedule A have long ago thrown away those demand notes, and have nothing to show except the receipts for the Income Tax which they have paid. I very much wish that His Majesty's Government would take into consideration what I venture to suggest to them now—namely, that they should be content not to ask for more details than the separate assessments of the Income Tax for 1908–9. Take an ordinary case of the assessment for Income Tax of an ordinary country property. You will find each farm tenant separately assessed. His farm would be separately returned. You will find all the woods in a parish belonging to and occupied by the same owner, although scattered over the parish, assessed under one single head. You will find, again, all the cottages in that parish belonging to the same owner and not occupied with farms assessed under one single assessment. Why cannot the Commissioners be satisfied with those assessments and not require the owners of property of that kind to specify all the details of such property—each wood and cottage separately? I make that suggestion because I am quite sure that the details asked for under this head only give useless trouble to the owners of that class of property, and are quite unnecessary for the fair assessment of the tax.
§ LORD WELBYMy Lords, I believe the Inland Revenue have made a concession on one point, but on that I do not think the public are quite clear. The paper sent out required a gross return, and I know that in a number of cases people have been a good deal troubled by having to add the Income Tax again to the net income as returned in their pass books after payment of Income Tax. Now I understand that the Inland Revenue, or the Treasury, have made a concession with regard to that point, and a very important one—namely, that the Inland Revenue will themselves add the Income Tax on to the net return as put in by the taxpayer. But I am informed that no order has gone out to that effect, and I would press upon 337 my noble friend whether it would not be a good thing if some order were issued by the Inland Revenue which would make it clear to the taxpayer that he was not obliged to take the extra trouble of adding the Income Tax already paid to the net return defined in his pass book. If such a, concession has been made, I think it is an error on the part, of the Inland Revenue not to make it perfectly clear by some public document that they have made it.
THE EARL OF CAMPERDOWNMy Lords, I rise for the, purpose of making only cine remark. Lord Denman, as I understood him, concluded by saying that Lord Faber was now of opinion that these minute returns which have been asked for by tin; Commissioners are reasonable. I do not know what his authority for making that statement is, but I can tell him this, that only the day before yesterday Lord Faber told me that he had sent in the returns under each of the four or five heads mentioned, and that they had been accepted by the Commissioners, and he had been asked Co send a cheque on that basis for Super-Tax. I do not know whether I have made it clear that I mean the totals under those heads, distinct from the directions. Income from trade, profession, and so on, is one head; then there is income from property, from occupation of land, from bank and other interests, annuities, dividends and wife's income. As the noble Lord quoted Lord Faber, I think I am justified in doing the same, and in telling your Lordships that Lord Faber sent in his return, according to what he said to me, under those five heads, giving the totals in each case, and no particulars.
LORD SEMPILLBefore the noble Lord replies further, I should like to state what happened with regard to an estate in Scotland in which I am interested. Quite recently the factor went to the surveyor of taxes and asked for information as to filling up the schedule. The surveyor informed him that he had received private instructions that he was not to give assistance to any person in filling up these schedules. I must confess to your Lordships that I think a matter like this is not private, and cannot be made private; and I wish 338 to ask whether those are the instructions that are given by the Super-Tax Commissioners.
LORD DENMANMy Lords, I think some little allowance ought in fairness to be made to a very hardly pressed, and, as far as I know about it, overworked office at the present moment; but to the best of my belief the Super-Tax Commissioners are perfectly willing to give information. I do not say they are going to assist every individual to fill up his return, but they are quite willing to give information, and I know in a great many cases they have done so in respect of how the returns are to be filled up. If the noble Lord would like to give me details afterwards as to the particular case he referred to, I will make inquiries about it; but if information was not forthcoming immediately, I think it may be due to the fact that these gentlemen are extremely hard worked at the present time, mid it is very difficult for them to cope with the great mass of work waiting in their office.
LORD SEMPILLI must admit that my own personal communications with the Super-Tax Commissioners have invariably been met with courtesy and prompt attention. The particular case that I referred to had reference to a subordinate.
LORD DENMANThen the noble Viscount opposite seemed to think it was a very simple matter for surveyors of taxes to give information without referring to the Super-Tax Commissioners.
§ VISCOUNT ST. ALDWYNNo, I did not mean that at all. My point was this. I understand that hitherto the practice has been to ask owners of property assessed under Schedule A to give a separate return of every piece of land or every cottage occupied by a different person belonging to them in a parish. My suggestion was this, that the Commissioners should be content with the existing Income Tax assessments, and that no further details should be required than are now given for the purpose of Income Tax under each assessment. I put a case where all the woods in a parish are assessed under one assessment, and all the cottages in the parish under another assessment; and instead of compelling an owner to send in a return of each separate wood, or each separate cottage, the Commissioners should be content with the existing assessments.
LORD DENMANI will certainly inform the Chancellor of the Exchequer of the noble Viscount's view on the matter, but, as far as I am aware, I think the concession we have made is the limit of what it is possible for us to do—
§ VISCOUNT ST. ALDWYNNo, I am sure it is not.
LORD DENMANAnd I cannot hold out any hope that the suggestion of the noble Viscount will be acceded to.