§ Sir E. Campbell
asked the Chancellor of the Exchequer if he is now in a position to make a further statement on the arrangements for making cash payments to temporary Crown servants who on entry into Crown service suffered overlapping payments of tax and who, in consequence of the introduction of Pay-as-you-earn, have been deprived of a compensatory tax holiday which they would otherwise have enjoyed on leaving Crown service.
§ 6. Sir J. Anderson
Yes, Sir. Details of the proposed arrangements are contained in the statement below. Broadly the underlying principle is that the cash payment should cancel out the tax charged under the Departmental assessment on Crown pay which overlapped with tax payments relating to the previous employment. It will obviously be necessary to set a term to these arrangements and, bearing in mind the class of person for whom the relief is intended, namely, those who came into the service of the State in time of great emergency, not thinking of their personal interests, I propose to limit the concession to those who entered Crown service on or after 6th April, 1939. In due course we shall have to fix a date for the termination of the arrangements, but consideration of this must be deferred until there has been some relaxation of the present restrictions on the release of persons in Crown service.
Following is the statement
This statement describes the arrangements under which effect will be given to the undertaking given by the Chancellor of the Exchequer in the course of the House of Commons Debates on the Income Tax (Offices and Employments) Bill on 17th February, 1944, the terms of which undertaking were as follows:1806WI am prepared now to say that I will see to it that arrangements are made which will have the effect that temporary Crown servants of all kinds, civil servants, and members of the Armed Forces, where two conditions are satisfied, where there has been an overlapping tax payment and where the tax holiday to which they were entitled to look forward has been withdrawn from them as a consequence of this legislation, shall receive a cash payment sufficient to relieve them of their disability."—[Official Report, 17th February, 1944; Vol. 397, c. 390.)
- (a) Nature and period of Crown Service.
- (i) The claimant must have entered Crown Service on or after 6th April, 1939, and must have remained continuously in such service until a date subsequent to 5th April, 1944; and
- (ii) he must have left Crown Service after 6th April, 1944 (but before a date to be fixed later) without having held a permanent post in that service.
- (b) Overlapping Tax Payment.
- (i) The claimant must have been liable to Income Tax in respect of the remuneration of an employment the duties of which he ceased to perform on entry into Crown Service;
- (ii) the ordinary due date for payment of some part of the tax on his remuneration from that employment must have fallen after the date of entry into Crown Service; and
- (iii) his remuneration must have been charged to Income Tax by the method of Departmental assessment and there must have been liability to tax on his remuneration for the year of entry into Crown Service or for the following year.
- (c) Loss of Tax Holiday.
The claimant must have left Crown Service and throughout the ensuing seven months have been either in employment within the scope of "Pay-as-you-Earn" or without any gainful occupation.
Computation of gross payment: persons entering Crown Service during the period fromth April, 1939, toth April,
The gross payment (which may be subject to deductions under paragraph 4 below) will be equal to the amount of tax charged under the original Departmental assessments on Crown pay for the period of overlap, i.e. the period for which there was liability under the normal rules of collection for concurrent payment of both "pre-Crown" tax and "Crown" tax. The period of overlap is: —
- (a) Six months for persons entering Crown Service in the Income Tax year 1939–40 or 1940–41;
- (b) seven months for persons entering in 1941–42 or 1942–43 from an employment assessable to tax on a yearly basis;
- (c) Nine months for persons entering in 1941–42 or 1942–43 from a manual employment assessable half-yearly.
The following examples show the method of computing the gross payment in typical cases, the overlap being seven months in both examples:
- (i) Entry on 5th July, 1941: A Departmental assessment for 1941–42 covers the nine months' Crown pay up to 5th April, 1942, the "pre-Crown" earnings up to date of entry being assessed separately. The gross payment is 7/9ths of the tax on the Departmental assessment, representing seven months' tax.
- (ii) Entry on 5th January, 1942: Departmental assessments for 1941–42 and 1942–43 cover respectively the three months' Crown pay to 5th April, 1942, and the Crown pay for the year 1942–43. The gross payment is the whole of the tax on the 1941–42 assessment plus 4/12ths of the tax on the 1942–43 assessment, making seven months' tax in all.
Computation of gross payment: persons entering Crown Service in the year endingth April,
Persons in this category will have received a cancellation of 7/12ths (or 10/12ths) of the tax on their earnings in "outside" employment for the year 1943–44. In such cases the gross payment will be the difference between (a) the amount of tax which would have been cancelled for 1943–44 if 7/12ths cancellation had been given in the case of Crown employments, and (b) the amount of tax actually cancelled for 1943–44.
Amount of actual payment
The actual payment will be the gross amount, computed as described in paragraph 2 or 3, less (a) any arrears of tax cancelled under Section 6 of the Income Tax (Offices and Employments) Act, 1944, or otherwise remitted or unpaid, and (b) the Income Tax post-war credit (if any) for the relevant year. If two years' Departmental assessments enter into the calculation the post-war credit to be deducted will be whichever is the smaller of the two.
The basis of payment will be subject to some modification in special classes of case—for example, where there was a 1808W special collection period in the pre-Crown employment (as in the case of certain classes of railway employees), or where the employee has already benefited from the Pay-as-you-Earn cancellation, as in cases where the former employer continued to pay some remuneration during the period of Crown Service and the tax liability on that remuneration was covered by the Departmental assessments.
Procedure for claiming payment
Temporary Crown servants who appear to have a prima facie title to a payment will be given a form of application, embodying the substance of the above statement, when they leave Crown Service. It is contemplated that temporary civil servants will receive the form from the employing Department, while members of the Forces will receive it from the Departmental Claims Branch of the Inland Revenue. Those who have left Crown Service before the application form becomes available will be able to obtain the form from the Inland Revenue.