§ 2.58 p.m.
§ Lord Moyne asked Her Majesty's Government:
§ Whether agricultural or other tenants whose rates have previously been paid by their landlords can have their community charge reimbursed without becoming liable to income tax on the reimbursement.
§ Lord MoyneMy Lords, in thanking my noble friend for his economically worded reply I have to declare an interest, not only as a farmer but also as a trustee of a large charitable housing trust. I have given my noble friend figures which show that the reimbursement of the community charge to resident superintendents and others, together with the income tax and insurance on it, even after allowing for the old rates saved at 50 per cent. reduction, is likely to cost the trust £103,000 a year. Does my noble friend appreciate that, while a farmer can possibly set such disbursements against his taxable profits, charities have no taxable profits against which to set them? Will the Government look at ways of alleviating such inequitable side effects of the unpalatable, perhaps wholesome but untried, medicine?
The Earl of CaithnessMy Lords, I accept that, in the circumstances described by my noble friend, to put the employee in exactly the same position as he was before will involve the employer paying more than the nominal cost of the community charge. The precise arrangements for remuneration between an employer and an employee are a matter for the parties themselves. However, perhaps I may jog my noble friend's memory. I am sure that he will recall that, having listened to the views of your Lordships' House, the Government decided last year to increase the level of mandatory relief on non-domestic rates for charities from 50 per cent. to 80 per cent. That will be of great benefit to all charities.
§ Lord BarnettMy Lords, does the Minister's answer mean that the poll tax is a tax rather than a community charge?
Lord Bruce of DoningtonMy Lords, will the noble Lord inform the House whether the ruling that he has given in regard to the liability of the employee to tax on any community charge paid on his behalf was advertised at the beginning as one of the benefits 424 of the community tax? Is he aware that where for example, an employer reimburses his employee in respect of community tax paid in the sum of £200, it will involve, together with national insurance, a payment by the employer of some £334?
The Earl of CaithnessMy Lords, I know that the noble Lord, Lord Bruce of Donington, is keen that we should be fair when it comes to tax. If an employer meets any personal liability of an employee, then, as a general principle, a charge to income tax arises. I am sure that the noble Lord will agree that that is fair. As I said, in certain cases it will be more than just the nominal cost of the community charge, but, as my noble friend Lord Moyne said, where the employer is trading, there can be an offset for the tax liability. However, as he so rightly said, that will unfortunately not apply in the case of charities.
§ Lord Boyd-CarpenterMy Lords, if the employer simply accepts liability for the charge himself, instead of reimbursing the employee or tenant, will the situation be the same?
The Earl of CaithnessYes, my Lords. The situation will remain the same in that the employee will be assessed for income on that.
Lord Bruce of DoningtonMy Lords, will the noble Lord answer the first part of my question? I apologise to the noble Lord, Lord Taylor of Gryfe, who wishes to ask a question. I give way to him.
§ Lord Taylor of GryfeMy Lords, does the Minister agree that the Question indicates another anomaly in this most unpopular measure? Is he aware that in today's press the Scottish banks have advised the Secretary of State for Scotland that they find it impossible to operate the hundreds of thousands of arrestment notices which have been lodged against non-payment of the tax?
The Earl of CaithnessMy Lords, I am afraid that I have not had the time that the noble Lord has had to read the papers. I shall endeavour to get round to that sometime today.
§ Baroness Gardner of ParkesMy Lords, as I understand the Minister's reply, he is saying that this would be treated as a taxable benefit and that one would pay tax only on the value of the money. However, will he confirm that, if the other tenants referred to in the Question are not employees, the Government intend to leave any arrangements for a landlord to charge a comprehensive rent, including rates, for decision between landlords and tenants?
The Earl of CaithnessMy Lords, I am afraid that my noble friend has lost me. If an employer pays a community charge for an employee, the employee will of course be assessed for income tax. If an employer pays the community charge for a previous employee who continues to live in a tied cottage, that is a different question and will depend on the circumstances surrounding the arrangements.
§ Lord Mackie of BenshieMy Lords, will the Minister give us the reasons behind that extraordinary change of front? In the old days I and many others paid the rates of employees living in tied cottages. Why should there be a sudden change? Why should we not be enabled to pay the poll tax in exactly the same way? There must be some reason for it.
The Earl of CaithnessMy Lords, there is a reason; indeed, it is a very good reason. Unlike rates, the community charge is a personal charge unrelated to accommodation. In view of that, I am surprised that the noble Lord does not have Section 145(4) of the Income and Corporation Taxes Act 1988 beside his bed for a little nighttime reading.
Lord Bruce of DoningtonMy Lords, will the noble Earl answer the first part of my question? Were those provisions put forward by the Government by way of explanation and frankness when the poll tax provisions were laid before Parliament, or did they have to wait for the Inland Revenue press release of 10th November last which I have before me?
The Earl of CaithnessMy Lords, I am delighted that the noble Lord has a copy of the Inland Revenue press release. We have never sought to hide any of the benefits or extra costs that might arise from the charge in certain cases.
§ Baroness Gardner of ParkesMy Lords, is the Minister aware that women paying tax on child care benefit would feel aggrieved if any special concession were made in the cases mentioned here, yet were not extended to child care?