§ Lord Boyd-CarpenterMy Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
§ The Question was as follows:
§ To ask Her Majesty's Government whether they were consulted by the Inland Revenue in connection with that department's decision to demand payment of income tax on contributions to club Christmas funds and whether they will identify the new statutory power which gives the Inland Revenue legal authority to make this demand.
§ The Minister of State, Treasury (Lord Cockfield)My Lords, the law on the subject is I fear quite clear. Payments of this kind constitute "emoluments" and are chargeable to tax. If payment is made through the employer he is required to deduct tax under PAYE in the ordinary way. There has been no change of policy: the Inland Revenue have simply been enforcing the existing law. No question of consulting Ministers would therefore arise.
§ Lord Boyd-CarpenterMy Lords, is my noble friend aware that the view of the law which he attributes to the Inland Revenue is plainly contrary to the view expressed by Lord Donovan, who I would accept was a very great authority on revenue law, a few years ago? Is it not a fact that this demand for tax on Christmas presents is a new development introduced in the last few months by the Inland Revenue?
§ Lord CockfieldMy Lords, although I can understand my noble friend's feelings on this matter, I fear that I cannot agree with what he says. The law has been in the present form for very many years, and Section 183 of the Income and Corporation Taxes Act 1970, which is simply a consolidation measure, says:
the expression 'emoluments' shall include all salaries, fees, wages, perquisites and profits whatsoever".The clear view of the Inland Revenue is that it is wide enough to cover the gratuities in question. On the second part of my noble friend's question, the position is that from time to time the Inland Revenue audit the records of employers and if they find, as in the present case, that the law has not been properly applied, they ask the employer so to apply it.
§ Lord Boyd-CarpenterMy Lords, is my noble friend suggesting that the existence of club Christmas funds came as a startling surprise this year to the Board of Inland Revenue, which has not previously made such 888 demands? Is he simply brushing aside, on the advice of some lawyer in the Inland Revenue, the view of Lord Donovan?
§ Lord CockfieldNo, my Lords; this is not so. I do not think that it came as a surprise either to the Inland Revenue or to anyone else that gratuities were paid to club servants at Christmas time. If these gratuities were not brought under the PAYE system, there was an obligation on the employees concerned to include them in their annual income tax returns. I am assured that no change in practice has taken place in this matter.
§ Lord KinnairdMy Lords, on what my noble friend the Minister has told us, can he say whether—and, if so, when—the Inland Revenue intend to put a tax on tips to taxi drivers and railway porters?
§ Lord CockfieldMy Lords, the position there is quite clear. Tips of that nature are liable to income tax and it is the practice of the Inland Revenue to endeavour to ensure that tax is paid upon them.