HC Deb 31 March 1994 vol 240 cc956-7W
Mr. Burns

To ask the Chancellor of the Exchequer if he will make a statement about the rules for the introduction of the current year basis of assessment for income tax.

Mr. Dorrell

The Inland Revenue has today published, in a press release, details of the rules that the Government intend to introduce in the next Finance Bill concerning the anti-avoidance provisions for the transition from the preceding year basis to the current year basis.

The transitional rules are set out in schedule 19 to the 1994 Finance Bill. They apply to businesses that commence before 6 April 1994 and to other sources from which income first arises before that date. Broadly, for the year 1996–97 they allow a catching-up process by averaging the profits for the two years ending in that year. Income in that period is therefore effectively taxed, in most cases, at half of the normal marginal rate for that year, and business profits arising in the period from the latest accounting date in 1996–97 to 5 April 1997 ultimately drop out of account altogether.

The purpose of the transitional rules is broadly to ensure that there is no double taxation of business profits and other income, presently taxed on the preceding year basis under schedule D, which the change to the current year basis of assessment might otherwise cause. But, because of the way that the rules work, and the certainty that profits or income arising in a particular period will be taxed at a reduced rate, and in some cases will drop out of account altogether, it is necessary to counteract the effect of artificially moving profits or income into these periods. The Government's intention is to deter such avoidance.

The proposals also deal with the treatment of other income, including interest, assessed on the preceding year basis, and with the treatment of interest paid on borrowings to finance trades, professions and businesses carried on in partnership.

The proposed legislation will have effect in respect of all periods which affect the amount of income assessed in 1996–97. For businesses taxed under cases I or II of schedule D this could commence as early as 7 April 1994.

The legislation will also affect the period before 6 April 1997 which is taxed in 1997–98. The new rules do not affect limited companies.

The Inland Revenue has consulted on the proposals and will publish draft legislation later this year.

Ms Harman

To ask the Chancellor of the Exchequer, further to his answer of 18 February to the hon. Member for Neath (Mr. Hain),Official Report, column 1032, if he will give estimates for each year from 1978–79 of the

1981–82 1989–90 1990–91 1991–92
Individuals paying tax1 Civilian labour force population of working age2 Individuals paying tax1 Civilian labourforce population of working age2 Individuals paying tax1 Civilian labourforce population of working age2 Individuals paying tax1 Civilian labourforce population of working age2
North 1,260 1,450 1,240 1,460 1,240 1,440 1,270 1,430
Yorkshire and Humberside 2,070 2,270 2,120 2,360 2,160 2,390 2,140 2,390
North West 2,760 3,010 2,630 3,090 2,840 3,080 2,740 3,060
East Midlands 1,530 1,810 1,760 2,020 1,910 2,020 1,840 2,020
West Midlands 2,280 2,450 2,250 2,580 2,340 2,610 2,260 2,590
East Anglia 800 850 970 990 990 1,020 1,030 1,010
South East 8,050 8,040 8,180 8,750 8,850 8,810 8,610 8,750
South West 1,850 1,910 1,980 2,240 2,350 2,240 2,270 2,270
Wales 1,090 1,210 1,130 1,300 1,220 1,320 1,240 1,310
Scotland 2,190 2,380 2,480 2,450 2,340 2,470 2,320 2,430
Northern Ireland 530 620 570 660 540 670 510 670
1 Including taxpayers above and below working age.
2 Men aged 16–64 years, women aged 16–59 years.