§ Mr. Hamilton Kerrasked the Chancellor of the Exchequer what is the basis of liability to Income Tax of an employéfor the year in which he joins His Majesty's Forces?
§ Sir J. SimonIn general, the ordinary full-time employéwould be regarded as ceasing his civil employment on joining the Forces, and his liability to Income Tax for the year of enlistment or mobilisation in respect of pay from his civil employer would then be based on his actual pay for that year, including any pay received from the civil employer during service with the Forces. Where a case is so dealt with, it is not proposed to take any steps to apply the special provision contained in Sub-section (5) of Section 45 of the Finance Act, 1927, under which in certain circumstances an additional assessment may be raised for the year preceding the year in which a cessation of employment takes place. The liability in respect of pay from the Forces would also be based on the actual pay for the year except in cases where pay had been received in respect of service with the Auxiliary Forces which was of sufficient length to bring the preceding year basis into operation.
There will be cases, however, especially where pay is received from the civil employer during service with the Forces, in which it would be more advantageous to an employé whose assessments in respect of civil pay have been on a preceding year basis, to have that basis continued instead of changing to the actual year basis. In such cases no objection will be offered to assessment on the footing that the pay from the civil employer and from the Forces arise from continuous employment so that the preceding yearbasis will not be disturbed, and the inclusive liability for the year of enlistment or mobilisation will then be on the amount of the earnings for the preceding year.