§ Colonel Baldwin-Webb
asked the Financial Secretary to the Treasury whether he is aware that, under a recent circular sent to bankers, paying agents and secretaries of companies, it was laid down that, in the case of dividends payable in, say, July, 1939, from which tax was deducted at 5s. 6d. in the £, the shareholder should be deemed to have received income amounting to the figure obtained by grossing the amount up to allow for Income Tax at 7s. in the £; and, as this arrangement appears to make certain taxpayers liable for Surtax on a larger gross income than is fair, what steps are to be taken to deal with this matter, and to ensure that all Surtax payers or taxpayers bordering on the Surtax limit return their dividends on a similar and proper basis?
§ Captain Crookshank
The position, when the standard rate of Income Tax changes and tax is deducted on payment of a dividend (other than a fixed-rate preference dividend) at a rate greater or less than the ultimate standard rate for the year, is governed by Sub-section (3) of Section 12 of the Finance Act, 1930, which provides that the net amount received shall be deemed to represent income of such an amount as would, after deduction of tax by reference to the standard rate for the year, be equal to the net amount received. The circular referred to is based on the provisions of this Section, and the position for the year 1939–40 is explained in the instructions accompanying the forms of return requiring statements of total income for that year.