Clause 15. — (Income Tax on offices, employments, and pensions to be chargeable under Schedule E.)

Orders of the Day — Finance Bill. – in the House of Commons on 13th July 1922.

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(6) The provisions of Sub-section (1) and Sub-section (3) of this Section shall have effect and shall be deemed always to have had effect, for the purpose of any assessment to Income Tax which is made or becomes final and conclusive after the first day of May, nineteen hundred and twenty-two, in respect of any employment (other than that of a weekly wage-earner employed by way of manual labour) under any public department, or under any company, society or body of persons or other employer mentioned in Rule 6 of the Rules applicable to Schedule E.

(7) Income Tax in respect of profits or gains which would but for the provisions of this Section have been chargeable under Schedule D for the year 1922–23, may be charged for that year either under Schedule D or under Schedule E, but the tax shall in all eases be computed in accordance with the provisions and rules applicable to Schedule E, as amended by this Act.

Photo of Mr William Graham Mr William Graham , Edinburgh Central

I beg to move, at the end of Sub-section (6), to insert the words but these provisions shall not apply to assessments in respect of offices and employments (other than offices and employments of profit) held under, and pensions paid by, a railway company for the years ending the fifth day of April, nineteen hundred and nineteen, nineteen hundred and twenty. nineteen hundred and twenty-one, and nineteen hundred and twenty-two, and readjustments and repayments in respect of such assessments for those years may be made on the basis of Income Tax having been chargeable under Schedule, D, notwithstanding that such assessments would, but for this provision, have become final and conclusive. 4.0 P.M.

I regret very much that from many points of view it is necessary this afternoon to re-argue the case which underlies this Amendment, but I will endeavour to do so as briefly as possible. I would ask the House to believe that this Amendment raises a question of first-class importance in the administration of the Income Tax of this country. The position, shortly, is that some time ago the Inland Revenue Authorities assessed railway clerks under Schedule E. which at that time and now is the schedule in the Income Taxlaw which covers employments of a public character. At that time objection was taken to the decision by a clerk of the Great Western Railway Company, and they started litigation arguing that the railway clerks were not really in public employment at all, but were in fact in ordinary employment which is covered in the usual way by Schedule D. Here was litigation which was promoted, not by the railway clerks, but by the Great Western Railway Company, in order to settle a very important principle. That case was con- sidered through its various stages and eventually reached the House of Lords, which decided, one judge dissenting, that these railway clerks had been wrongly assessed under Schedule E, that in point of fact, their's was no more a public employment than any other class of employment in the country, and one would naturally assume, following that decision, that the railway clerks would be put back in the position which they should have occupied all along. That, in short summary, is the position of this litigation, and I beg the House to consider the very important point that now arises in what is undoubtedly the extraordinary attitude of the Inland Revenue Authorities on this question. Although that decision has been given by the House of Lords, and although it is plain that they took into account, as they were bound to do, the whole circumstances of the case, and although I think nine out of ten Members of the House would agree that a wrong assessment had been made, the Inland Revenue Authorities refused to concede to railway clerks as a class the benefit of the decision, and the position comes to this, that while the clerk Hall at Swindon, who was the particular clerk affected by this litigation, gets a refund of any money to which he is entitled, in other words, can be put back under Schedule D, that right is not afforded to all other railway clerks who were undoubtedly covered by this decision. I trust in this matter to the undoubted fairness of the House of Commons.

If I may anticipate the reply which will be made by the Gvernment, I have no doubt, in part at least, it will be on these lines. They will say, "As regards this clerk Hall, we admit that the Bater decision must stand, and we are prepared to refund any money which, under that decision, he may be entitled to," and, in point of fact, the clerk Hall, within the past few days, has got a refund of that money. The Government will then, probably, argue that they are not, however, bound to extend that concession to other railway clerks. So that it comes to this, that that very important litigation, which was promoted by the Great Western Railway Company, and which they eventually took to the House of Lords. is to apply to only one clerk, after all that expense, unless other railway clerks throughout the country choose to bring action in terms of the Bater decision and get what are their undoubted rights against the Inland Revenue authorities. That is a perfectly intolerable state of affairs and from no point of view can it be defended by this House. The Chancellor of the Exchequer will probably argue that no very great hardship is involved and that, in any case, the learned judges who considered this problem passed opinions which were on the whole not complimentary to Income Tax law on these matters. It is true that if we read the opinions delivered by the judges in giving the Bater Judgment they did adversely criticise the chaos and the difficulty into which this part of Income Tax law has fallen. But no amount of obiter dicta or expression of opinion on the part of the judges in the case itself can get round this plain and simple fact, that what they were considering was particularly whether a railway clerk was in a public employment which would place him under Schedule E or whether in point of fact he was in ordinary employment under which he should have been assessed under Schedule D. In practice, the difference is this, that under Schedule E there is the one year's basis, whereas under Schedule D there is provision, until the modifications which are introduced by the present Bill, for a three years' average. There are considerable numbers of railway clerks who were on active service during the War, and it is particularly that section of the railway clerk community which will be penalised if the present decision stands.

There is not the slightest doubt that this litigation was brought by the Great Western Railway Company to cover a class of employés, namely, railway clerks, and that they would never have thought of supporting this litigation because of the rights of a certain individual, and it is therefore our duty as a House of Commons to see that, for past years at all events, railway clerks get the benefit of this Bater decision. I wish to make it perfectly plain that we are making no criticism whatever as regards the future. This Finance Bill provides for a very great extension of Schedule E, and large numbers of people who have hitherto been assessed under Schedule D will now come under Schedule E and be assessed for Income Tax purposes like people who clearly and plainly hold employment of a public character. All we are saying is that as regards those past three or four years, and particularly as regards that period during which this litigation has been in progress, we cannot on any argument of any kind deny to the railway clerks as a class the benefit of the decision, which undoubtedly applied to them as a whole, under the Bater Judgment. I think Members in all parts of the House will agree that there was a wrong assessment by the Inland Revenue authorities. It took three years to obtain the Bater Judgment, showing that that was a wrong assessment, and yet although the assessment has been proved to be wrong as applied to a class—and, of course, under Schedule E it must apply to a class—these clerks are denied the right which this individual' clerk will enjoy by reason of the judgment which has been given. Nothing can get round the argument that the assessment was wrong, and that it would be manifestly unfair to put railway clerks in this position of injustice because of an error committed by the Inland Revenue authorities. I only ask that they shall get the benefit of the judgment of the highest Court in the land in the litigation brought by the railway company itself, and I think in making that plain I am asking for something which is eminently reasonable and fair. Every effort has been made to arrive at a settlement without putting this Amendment again on the Order Paper. I think the case the Chancellor puts is that there is some administrative or other difficulty, but on that point I am in a position to say there is no desire whatever to press for early adjustment. As a matter of fact, even if the adjustment took a year or two no railway clerk would complain. All I am asking is that they should get the benefit of the decision, which has established beyond the shadow of a doubt that they have been the victims of an erroneous assessment.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

When this matter was last considered in Committee the hon. Member made a very cogent and persuasive speech upon this question, and I undertook to meet a deputation of railway clerks who would personally put the point of view which they held so that I should be better able to form a final and considered judgment upon this question. I bad that meeting, and I have reconsidered the whole topic and have come to the conclusion that the judgment which I originally formed must be that which I shall present to the House to-day. The matter is not an easy one, but I shall beg the House, in the first place to keep this clearly in view, that those who are assessed under Schedule E are assessed upon each single year's income instead of upon the average of three years' which is dealt with under Schedule D. These railway clerks have been assessed under Schedule E, each of them paying his Income Tax upon the basis of each particular year. The case which was raised has been described as being raised by the railway company. That, in fact, I am afraid, is an inaccurate statement. The case was initiated by Hall himself, and I have here a copy of the letter in which his original appeal against the assessment was made. It is an appeal by himself alone. But when he wanted to take the appeal to the Special Commissioners the railway company are the only people who can make the appeal, and accordingly I shall quote the words of the railway company in lodging their appeal. They state that the Special Commissioners were unable to accept Hall's appeal, and the Great Western Railway Company, upon the request of Mr. W. H. Hall, hereby give formal notice of appeal against his assessment. There is no point at all to he made such as the hon. Member suggested that in truth this was an appeal by a railway company on behalf of a class of their employés whom they represented. It is not so at all. Hall initiated his own appeal. He had to go to the railway company to get their formal acquiescence in his appeal, and a statement of his appeal upon his behalf, and they made the appeal not because they themselves were urging it on behalf of any class of their employés, but simply stated an appeal on Hall's behalf alone. That is the fact, and no point of any sort can be made upon the ground that the railway company was titularly the appellant.

Having dealt with that matter, let me remind the House that these people in the position of Hall have been assessed under Schedule E for a number of years, to everybody's knowledge. This question was raised, no doubt, not merely because Hall was dissatisfied, but because a number of others were dissatisfied by their being assessed under Schedule E instead of Schedule D. Let me remind the House of this fact, that in law once assessments are made against which no appeal has been taken they become final, and in law there is no claim on the part of anybody for an alteration of his assessment or for a return of what he has paid if he has not taken the steps that Hall took, for example, to have the matter altered. Accordingly, in law, it is true that no other railway clerk, even if his case was entirely the same as that of Hall, would toe entitled to make any claim, unless he had lodged an appeal and taken the proper steps. From the point of view of law alone, there is no legal claim, and my hon. Friend does not suggest that there is any, on behalf of anybody else except Hall, for the alteration in the amount of payment which he was bound to make in respect of Income Tax.

My hon. Friend says that the Hall case covers the case of all the other railway clerks. I have read with care since the last Debate in Committee, the judgment of the House of Lords upon this question. As my hon. Friend has said, one of the distinguished Judges dissented from the conclusions arrived at by the others; but that does not affect the law. The law is as laid down by the majority. Is it possible to read the judgment of the majority and come to the conclusion that they have laid down any general rule whatsoever? They go into this case of Hall with the most meticulous care. They describe his experience in the railway service from the time of his entry into the service until the date that he brought his appeal, but nothing is said which would induce anybody to believe that any other case is, in fact, covered by that judgment. I will not quote the judgment, but anybody reading is would come to the conclusion that, whatever is to be said about the judgment, at least this must be said, that you cannot draw any conclusion as to any other case from the particular circumstances with which they dealt. In point of fact, three of the judges, the majority, refer with great particularity to Hall, and say that in his particular case they come to a certain judgment and they indicate that some change is required in the law. That change in the law we propose to make by the present Bill, and I understand my hon. Friend entirely agrees to that change. In future, railway clerks will be assessed, as they have been assessed in the past, under Schedule E.

My hon. Friend says that in the case of Hall he has had a re-adjustment made for the last three years' period, and that therefore other railway clerks must be given the same privilege. As I have pointed out, the judgment did not, in fact, necessarily cover the case of anybody else but Hall. That in itself would not have finally induced me to make up my mind, but when I come to consider the question of equity and fairness I cannot find that there is anything inequitable or unfair in leaving the other railway clerks in the position in which they are now, and in the position in which they are going to be, and by their own acquiescence, in the future. Can they say that anything has been exacted from them which has not been imposed upon the other citizens of this country? They have paid their Income Tax upon that which they actually earned. They cannot say that there has been a greater exaction than was fair. They may say that if they were in the same position as Hall they would have got off with some payment less than they would have been obliged to pay in consequence of their being assessed on their actual earnings. That does not begin to make a very good case in equity; it is a purely technical point. All they can say is that they are not being so well treated as Hall, who has now succeeded in establishing a claim for himself, namely, being assessed upon the three years' average; but nobody can say that he is being assessed upon a greater sum than that which he actually earns.

One last word upon the practical difficulties. If this Amendment were carried it would not be possible to stop at the railway clerks. It would be a very large operation to rip up the assessments of 250,000 people for the last three years; but it must extend far wider than that, if all the people in the position of these railway clerks are to have their assessments re-adjusted for the last three years, and be put upon the basis of Schedule D rather than upon the basis of Schedule E. There are 750,000 people assessed on the basis of Schedule E who would, if this judgment is as universally applicable as my hon. Friend suggests, be equally entitled to make the same sort of claim. He confines it to railway clerks, but if the judgment has an application to anybody more than Hall it is a judgment that is applicable, not merely to railway clerks, but to a very large variety of other people.

Photo of Mr William Graham Mr William Graham , Edinburgh Central

I am sure that the Chancellor of the Exchequer is the last to wish to be unfair. There can be no such confusion as he suggests. Under the rules to Schedule E in the Income Tax Act, 1918, various classes of public appointments are definitely specified and set forth. There can be no doubt at all there; but there was a doubt about railway clerks, and this Amendment is strictly confined to them. It cannot be extended in the way my right hon. Friend suggests.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

My hon. Friend will see the dilemma in which I am placed. After reading the judgment of the House of Lords, I say that either it is applicable only to Hall's case and, therefore, cannot be extended to other railway clerks, or that it has a far wider ramification and would extend to a large number of employés other than railway clerks, who would be equally well described by that judgment if it goes beyond Hall. Accordingly, I suggest that, in the first place, you cannot say that, necessarily, railway clerks other than Hall are covered by this judgment, and, in the second place, there is no inequity or unfairness in this particular case, because nobody can say that these men have been assessed on more than their actual earnings year by year. Nobody has been obliged to pay Income Tax on more than he has actually earned in the year. To seek now to alter this matter would involve administrative difficulties of a portentous kind which, from the practical point of view, I do not think the Inland Revenue would succeed in carrying out. Accordingly, for all these reasons, and having considered the matter with every desire to come to the most reasonable view which is possible, I feel I cannot accept the Amendment.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

I am rather sorry that the right hon. Gentleman has come to that conclusion. As I understand his argument, it is that the railway company brought the appeal and not the clerk. I believe that is correct, but I do not see that it matters who brought the appeal. The fact remains, that the appeal was brought and the judgment was given.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

The right hon. Baronet must not misunderstand what I said. I did not lay any stress upon the fact that the railway company brought the appeal. I was simply replying to my hon. Friend and pointing out that the railway company brought the appeal at the instance of Hall, but I did not found anything upon it.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

If that were a correct statement, I do not see that it has anything to do with the case.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

Then I withdraw any statement I have made in regard to that. The next statement made by the right hon. Gentleman was, that under the law a person who has not made an appeal, or given notice that he intends to make an appeal, cannot get any re-assessment, or get back any tax, that was paid wrongly by him, because the tax has become authorised by law. That. I suppose, is the correct reading of the law; but this is an Amendment to alter the law in that respect and to give the Chancellor of the Exchequer power to give to these particular people a certain abatement. Therefore, that argument falls to the ground. The real position is that a certain man, one of the railway clerks who were in a different position from the other people to whom the right hon. Gentleman refers, brought an action. Whatever the reasons which were given by the House of Lords, and whither there was a majority or a minority of the Lords on the judgment, does not matter, because there was an actual majority, who decided that Hall was right and the Inland Revenue was wrong. That being so, is it advisable to take advantage of the strict letter of the law, which the right hon. Gentleman would be bound to do if this Amendment be not carried, to prevent this judgment being carried out to the full 3 We all know perfectly well that it is impossible for any private individual, whatever his rank or position in life, unless he is one of the few millionaires to whom hon. Members opposite refer, to proceed against the Inland Revenue, which has the resources of the whole country at its back. Therefore, what happens occasionally is that assessments are made which are not strictly legal. The individual in question then says to himself, "It will cost me so much, because the Government, who have the resources of the country behind them, will take the case to the House of Lords, because they do not care what they spend. If the case goes to the House of Lords, and even if I win, I shall lose much more than I should have had to pay if I had paid and said nothing." In this case, however, Hall brought an action, and succeeded. Is it not common justice, then, to allow those people who if they had brought an action would have benefited in the same way, to be treated as this particular person is being treated?

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

If the right hon Baronet will read the judgment, I am afraid he will come to the same conclusion that I did.

Photo of Mr Frederick Banbury Mr Frederick Banbury , City of London

Here was a certain railway clerk who was assessed under a certain Schedule, and he claimed that he was wrongly assessed, and that he ought to be assessed under another Schedule. The case went to the House of Lords, and the Lords held that he was right and that the Inland Revenue was wrong. Why should not that apply to other railway clerks in exactly the same position? I cannot see that it does not apply. I say that the Inland Revenue, having made a mistake, and having now an opportunity of rectifying that mistake, ought to accept this Amendment. The

Government, by a Clause in this Bill, are altering the judgment of the House of Lords. Why should they not, by accepting this Amendment, allow that judgment to hold good during the years the man Hall has benefited? It is either right, or it is wrong. If it be wrong, do not do it; but, if it be right, do it, even if it causes a considerable amount of extra trouble

Photo of Mr Stanley Holmes Mr Stanley Holmes , Derbyshire North Eastern

The Chancellor of the Exchequer has said that the judgment is not likely to apply to other railway clerks but surely it is understood on both sides to be a test case.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

The hon. Member will find nothing to that effect in the House of Lords judgment.

Photo of Mr Stanley Holmes Mr Stanley Holmes , Derbyshire North Eastern

If the right hon. Gentleman thinks that the House of Lords judgment refers to Hall and Hall alone, why is he introducing this Clause and changing the whole of our Income Tax assessment?

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

For a very simple reason. What we are doing now will not only make it quite certain with regard to all railway clerks, but it also deals with the whole range of people in similar employment about whom there has been considerable doubt, and some of whom have been assessed under Schedule D and others under Schedule E.

Question put, "That those words be there inserted in the Bill."

The House divided: Ayes, 98; Noes, 189.

Division No. 224]AYES.[4.35 P.m.
Adamson, Rt. Hon. WilliamGraham, W. (Edinburgh, Central)Lawson, John James
Asquith, Rt. Hon. Herbert HenryGriffiths, T. (Monmouth, Pontypool)Locker-Lampson, G. (Wood Green)
Banbury, Rt. Hon. Sir Frederick G.Grundy, T. W.Lunn, William
Banton, GeorgeGuest, J. (York, W. R., Hemsworth)Macdonald, Rt- Hon. John Murray
Barker, G. (Monmouth, Abertillery)Gwynne, Rupert S.Maclean, Neil (Glasgow, Govan)
Barrand, A. R.Hall, F. (York, W.R., Normanton)Maclean, Rt. Hon. Sir D. (Midlothian)
Bowerman, Rt. Hon. Charles W.Hallas, EldredMcNeill, Ronald (Kent, Canterbury)
Briant, FrankHalls, WalterMacquisten, F. A.
Brown, James (Ayr and Bute]Hayday, ArthurMalone, Major P. B. (Tottenham, S.)
Cairns, JohnHerbert Dennis (Hertford, Watford)Marriott, John Arthur Ransome
Cape, ThomasHills, Major John WallerMildmay, Colonel Rt. Hon. F. B.
Carter, W. (Nottingham, Mansfield)Hirst, G. H.Morrison, Hugh
Cecil, Rt. Hon. Lord R. (Hitchin)Hodge, Rt. Hon. JohnMosley, Oswald
Clynes, Rt. Hon, John R.Hogge, James MylesMurray, Hon. A. C. (Aberdeen)
Collins, Sir Godfrey (Greenock)Holmes, J. StanleyMurray, Dr. D. (Inverness & Ross)
Davies, A. (Lancaster, Clitheroe)Houston, Sir Robert PattersonMyers, Thomas
Davies, Alfred Thomas (Lincoln)Irving, DanNaylor, Thomas Ellis
Davies, Rhys John (Westhoughton)Jackson, Lieut.-Colonel Hon. F. S.Ormsby-Gore, Hon. William
Davison, J. E. (Smethwick)Johnstone, JosephPalmer, Major Godfrey Mark
Edwards, C. (Monmouth, Bedwellty)Jones, Morgan (Caerphilly)Parkinson, John Allen (Wigan)
Edwards, Hugh (Glam., Neath)Kenworthy, Liout.-Commander J. M.Raffan, Peter Wilson
Fildes, HenryKenyon, BarnetRees, Capt. J. Tudor- (Barnstaple)
Finney, SamuelKiley, James DanielRendall, Athelstan
Galbraith, SamuelLambert, Rt. Hon. GeorgeRichardson, R. (Houghton-le-Spring)
Roberts, Samuel (Hereford, Hereford)Thomas, Rt. Hon. James H. (Derby)Williams, Aneurin (Durham, Consett)
Rose, Frank H.Thomas, Brig.-Gen. Sir O. (Anglesey)Wilson, Capt. A. S. (Holderness)
Royce, William StapletonThomas, Sir Robert J. (Wrexham)Wilson, James (Dudley)
Sexton, JamesThomson, T. (Middlesbrough, West)Wolmer, Viscount
Sitch, Charles H.Thorne, W. (West Ham, Plaistow)Wood, Major M. M. (Aberdeen, C.)
Smith, Sir Malcolm (Orkney)Waterson, A. E.Wood, Major Sir S. Hill- (High Peak)
Spoor, B. G.Watts-Morgan, Lieut.-Col. D.
Sprot, Colonel Sir AlexanderWedgwood, Colonel Josiah C.TELLERS FOR THE AYES.—
Sueter, Rear-Admiral Murray FraserWhite, Charles F. (Derby, Western)Mr. R. Young and Mr. Kennedy.
Swan, J. E.Wignall, James
NOES.
Adair, Rear-Admiral Thomas B. S.George, Rt. Hon. David LloydNicholson, Brig.-Gen. J. (Westminster)
Agg-Gardner, Sir James TynteGibbs, Colonel George AbrahamNicholson, Reginald (Doncaster)
Ainsworth, Captain CharlesGilbert, James DanielNicholson, William G. (Petersfield)
Armstrong, Henry BruceGilmour, Lieut.-Colonel Sir JohnNorman, Major Rt. Hon. Sir Henry
Atkey, A. R.Glyn, Major RalphNorris, Colonel Sir Henry G.
Baird, Sir John LawrenceGrant, James AugustusPain, Brig.-Gen. Sir W. Hacket
Baldwin, Rt. Hon. StanleyGreen, Joseph F. (Leicester, W.)Parker, James
Balfour, George (Hampstead)Greene, Lt.-Col. Sir W. (Hack'y, N.)Pearce, Sir William
Barlow, Sir MontagueGreenwood, Rt. Hon. Sir HamarPease, Rt. Hon. Herbert Pike
Barnes, Rt. Hon. G. (Glas., Gorbals)Greig, Colonel Sir James WilliamPercy, Charles (Tynemouth)
Barnston, Major HarryGuest, Capt. Rt. Hon. Frederick E.Perkins, Walter Frank
Beauchamp, Sir EdwardGuinness, Lieut. Col. Hon. W. E.Pilditch, Sir Philip
Beckett, Hon. Sir GervaseGuthrie, Thomas MaulePollock, Rt. Hon. Sir Ernest Murray
Bell, Lieut.-Col. W. C. H. (Devizes)Hamilton, Sir George C.Rae, Sir Henry N.
Benn, Capt, Sir I. H., Bart, (Gr'nw'h)Harmsworth, C. B. (Bedford, Luton)Randies, Sir John Scurrah
Bennett, Sir Thomas JewellHarmsworth, Hon. E. C. (Kent)Reid, D. D.
Bethell, Sir John HenryHarmsworth, Sir R. L. (Caithness)Remnant, Sir James
Bigland, AlfredHarris, Sir Henry PercyRenwick. Sir George
Bird, Sir William B. M. (Chichester)Henderson, Lt.-Col. V. L. (Tradeston)Richardson, Lt.-Col. Sir P. (Chertsey)
Boyd-Carpenter, Major A.Hilder, Lieut.-Colonel FrankRoberts, Rt. Hon. G. H. (Norwich)
Brassey, H. L. C.Hoare, Lieut.-Colonel Sir S. J. G.Roberts, Sir S. (Sheffield, Ecclesall)
Brittain, Sir HarryHolbrook, Sir Arthur RichardRobinson, S. (Brecon and Radnor)
Broad, Thomas TuckerHood, Sir JosephRoundell, Colonel R. F.
Brown, Major D. C.Hope, Lt.-Col. Sir J. A. (Midlothian)Royds, Lieut.-Colonel Edmund
Brown, Brig.-Gen. Clifton (Newbury)Hopkins, John W. W.Rutherford, Colonel Sir J. (Darwen)
Buckley, Lieut.-Colonel A.Hopkinson, A. (Lancaster, Mossley)Samuel, A. M. (Surrey, Farnham)
Bull, Rt. Hon. Sir William JamesHorne, Sir R. S. (Glasgow, Hillhead)Samuel, Rt. Hon. Sir H. (Norwood)
Burdon, Colonel RowlandHunter, General Sir A. (Lancaster)Sanders, Colonel Sir Robert Arthur
Burgoyne, Lt.-Col. Sir Alan HughesHurst, Lieut.-Colonel Gerald B.Sassoon, Sir Philip Albert Gustave D.
Burn, Col. C. R. (Devon, Torquay)Inskip, Thomas Walker H.Scott, A. M. (Glasgow, Bridgeton)
Butcher, Sir John GeorgeJames, Lieut.-Colonel Hon. CuthbertScott, Sir Leslie (Liverp'l, Exchange)
Casey, T. W.Jetton, C.Seely, Major-General Rt. Hon. John
Cecil, Rt. Hon. Sir Evelyn (Aston)Kellaway, Rt. Hon. Fredk, GeorgeShortt, Rt. Hon. E. (N'castle-on-T.)
Cecil, Rt. Hon. Lord H. (Ox. Univ.)Kelloy, Major Fred (Rotherham)Simm, M. T.
Chamberlain, N. (Birm, Ladywood)King, Captain Henry DouglasStanley, Major Hon. G. (Preston)
Churchill, Rt. Hon. Winston S.Kinloch-Cooke, Sir ClementStanton, Charles Butt
Clay, Lieut.-Colonel H. H. SpenderLane-Fox, G. R.Starkey, Captain John Ralph
Clough, Sir RobertLarmor, Sir JosephSteel, Major S. Strang
Cobb, Sir CyrilLaw, Alfred J. (Rochdale)Stewart, Gershom
Colfox, Major Wm. PhillipsLeigh, Sir John (Clapham)Sturrock, J. Leng
Conway, Sir W. MartinLewis, Rt. Hon. J. H. (Univ., Wales)Sutherland, Sir William
Cope, Major WilliamLindsay, William ArthurTerrell, George (Wilts, Chippenham)
Cory, Sir J. H. (Cardiff, South)Lister, Sir R. AshtonThomson, F. C. (Aberdeen, South)
Courthope, Lieut.-Cot. George L.Le[...]ker-Lampson, Com. O. (H'tingd'n)Thomson, Sir W. Mitchell- (Maryhill)
Cralk, Rt. Hon. Sir HenryLorden, John WilliamTryon, Major George Clement
Curzon, Captain ViscountLowther, Maj.-Gen. Sir C. (Penrith)Turton, Edmund Russborough
Davidson, Major-General Sir J. H.McLaren, Hon. H. D. (Leicester)Ward, Col. L. (Kingston-upon-Hull)
Davies, Thomas (Cirencester)M'Lean, Lieut.-Col. Charles W. W.Warren, Sir Alfred H.
Davison, Sir W. H. (Kensington, S.)McMicking, Major GilbertWheler, Col. Granville C. H.
Dawson, Sir PhilipMacnamara, Rt. Hon. Dr. T. J.White, Col. G. D. (Southport)
Dockrell, Sir MauriceMacpherson, Rt. Hon. James I.Williams, C. (Tavistock)
Du Pre, Colonel William BaringMagnus, Sir PhilipWilliams, Lt.-Col. Sir R. (Banbury)
Elliot, Capt. Walter E. (Lanark)Mallaby-Deeley, Sir HarryWills, Lt. Col. Sir Gilbert Alan H.
Evans, ErnestMatthews, DavidWilson, Col. M. J. (Richmond)
Falle, Major Sir Bertram GodfrayMitchell, Sir William LaneWinterton, Earl
Fell, Sir ArthurMond, Rt. Hon. Sir Alfred MoritzWise, Frederick
Flannery, Sir James FortescueMoore-Brabazon, Lieut.-Col. J. T. C.Wood, Hon. Edward F. L. (Ripon)
Forrest, WalterMunro, Rt. Hon. RobertWood, Sir J. (Stalybridge & Hyde)
Foxcroft, Captain Charles TalbotMurchison, C. K.Worsfold, T. Cato
Fraser, Major Sir KeithMurray, Rt. Hon. C. D. (Edinburgh)Worthington, Evans, Rt. Hon. Sir L.
Frece, Sir Walter deMurray, John (Leeds, West)
Ganzonl, Sir JohnNeal, ArthurTELLERS FOR THE NOES.—
Gardiner, JamesNewman, Sir R. H. S. D. L. (Exeter)Colonel Leslie Wilson and Mr.
Gardner, ErnestNewson, Sir Percy WilsonDudley Ward.
Gee, Captain RobertNicholl, Commander Sir Edward

Photo of Mr John Whitley Mr John Whitley , Halifax

The next two Amendments on the Paper, standing in the name of the hon. Member for Thornbury (Mr. Rendall)—at the end of the Clause to insert the words Provided that any persons whose income has hitherto been chargeable under Schedule D, and by this Section becomes chargeable under Schedule E, applies to the Commissioners before the thirtieth day of September, nineteen hundred and twenty-two, that his income should, during the present and the two following years, be chargeable under Schedule D, his income shall continue to be so chargeable— and in the name of the hon. Member for North-East Derbyshire (Mr. Holmes)—at the end of the Clause to insert a new Sub-section (8) Provided that in any case where the taxpayer can show that but for the operation of this Section the amount of the assessment made upon him would have been less, he shall be entitled to be assessed for the year 1922–23 in such an amount as is equal to the assessment which would have been made upon him but for the passing of this Section plus one-third of the difference between this assessment and the assessment made under this Section.For the year 1923–24 he shall be entitled to be similarly assessed, except that the amount to be added to the assessment that would have been made upon him but for the passing of this Section shall be two-thirds of the difference between the assessment under this Section and the assessment that would have been made upon him but for the passing of this Section"— deal more or less with the same point. The House has negatived the smaller proposition; therefore, it is not open to the House to accept the larger proposition.

Photo of Mr Stanley Holmes Mr Stanley Holmes , Derbyshire North Eastern

The Chancellor of the Exchequer said that he was taking advantage of this House of Lords decision to clear up the doubtful point whether certain people should be assessed under Schedule D or Schedule E. The Amendment just disposed of concerned only railway clerks. The Clause itself concerns every person in employment, and the Amendment which I have put down is an attempt to somewhat temper the wind to the shorn land.

Photo of Mr Athelstan Rendall Mr Athelstan Rendall , Thornbury

When I put an Amendment down for the Committee stage on this point, the Solicitor-General, with great skill, explained to the Chairman that I was under a great delusion if I thought that I had found the right place to move the Amendment. He argued that the Chairman ought not to allow the Amendment to be moved, because we were dealing with an explanatory Clause. It was therefore not discussed or dealt with in Committee at all.

Photo of Mr John Whitley Mr John Whitley , Halifax

The first Amendment proposes to give the taxpayer an option to choose his own Schedule. Yesterday the House decided against giving the taxpayer an option of heads I win, tails you lose. I will, however, allow a short Debate on the second Amendment, which covers the other point.

Photo of Mr Stanley Holmes Mr Stanley Holmes , Derbyshire North Eastern

I beg to move, at the end of the Clause, to insert a new Subsection— (8) Provided that in any case where the taxpayer can show that, but for the operation of this Section, the amount of the assessment made upon him would have been less, he shall be entitled to be assessed for the year 1922–23 in such an amount as is equal to the assessment which would have been made upon him, but for the passing of this Section plus one-third of the difference between this assessment and the assessment made under this Section.For the year 1923–24 he shall be entitled to be similarly assessed, except that the amount to be added to the assessment that would have been made upon him, but for the passing of this Section, shall be two-thirds of the difference between the assessment under this Section and the assessment that would have been made upon him, but for the passing of this Section. The Chancellor of the Exchequer explained that he was taking advantage of this decision of the House of Lords in order to clear up a point that has always been doubtful with regard to certain employés. The Income Tax Act, 1918, was a consolidation of the Income Tax Acts from 1842 onwards. The 1842 Act was really a reprint of the Act of 1806, with certain alterations. The Act of 1806 was almost the same as the Act of 1805, and I think I am right in saying the term "office or employment" was there used. I think as far back as 1805—it may have been 1803—the term "office or employment" was used to include offices corporate or incorporate. The Inland Revenue since 1862 have assumed that those employed by limited companies under the 1862 Act come under Schedule E. It has always been done, and there has always been discussion as to whether they have a right to do so. Those who made our law in 1803 or 1805 did not see far enough forward to realise that we should have a system of limited companies commencing in 1862. The Chancellor of the Exchequer is now going to clear up what has always been a doubtful point by means of legislation.

What has always happened in the past has been that when a business was turned from a private partnership into a limited company the chief officials have suddenly found themselves deprived of the three years' average, and compelled to pay on their first year's salary in the new com- pany. That has always been a matter of great discontent. Perhaps the Chancellor of the Exchequer has not come into contact with it so much as some of us who have to advise on these matters. We find that men, who have been receiving £400 or £500 a year, and who, if the firm had remained a firm, would have had the advantage of the three years' average, are suddenly told that, because their employers have turned their business into a limited company, they must give up the three years' average and pay on their salary of that year. The Chancellor of the Exchequer says, "We will make an end of this, and everybody shall pay on his actual earnings if he is in employment." That may be a good thing to do. The discontent will only last for three years, or two years from now, but for the next two years many will feel that they have been deprived of their rights, and what I am asking the Chancellor of the Exchequer in this Amendment is, as I said just now, to temper the wind to the shorn lamb; in other words, for next year, 1922–23, to say to the man, "You shall pay on the three years' average, plus one-third of the difference between your actual salary for this year and the three years' average, and next year you shall pay on the three years' average, plus two thirds of the difference between what your salary actually is and the three years' average." I think, if he did that, it would not cost him very much, and it would remove a great deal of discontent amongst what you might call the smaller officials, those who are in subordinate positions in many firms throughout the country.

Photo of Mr Athelstan Rendall Mr Athelstan Rendall , Thornbury

I beg to second the Amendment.

I think it is a very reasonable one, because it would make it more easy for persons who are quite suddenly brought under a new law. There are a large number of young men, who went to fight in the Great War, whose education and training in their jobs was necessarily postponed. They came back from the War, and have had to learn their jobs, starting with very low salaries. I, have a case here of a man who the first year got a salary of £145, and next year £250, and the year after £400, as he was then getting on and being appreciated. As a result of earning those sums in those three years, about a month, before this Budget was introduced ho sent in his Income Tax return and, after making the deductions, the amount he would have to pay worked out at about £15 l1s. 3d., supposing this new law had not been made. As a result of the proposals in this Bill, he is now going to be made to pay on his present year's salary, which has now advanced to £500. It may be said that he is getting on so well that he can well afford to pay. There is something in that, but it is a big thing suddenly to ask this man to pay £50 12B. 6d. after all deductions have been made. This young man is to pay an extra £35, and the fact that he is getting on is not a sufficient excuse for that extra burden. All I am asking is that these comparatively few individuals, who ought to have a little help in getting over the next three years, ought not to be made quite suddenly to bear this extra taxation. It is an alteration of which I am entirely in favour, but when you make an alteration which is good for the general community, you ought not to injure the small number, but should make it easier for that small number to be able to bear the alteration of the law. I think the amount would be very small to the Exchequer, if this Amendment were accepted, and it would do away with the burning sense of injustice which these young men feel.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

The arguments which have been advanced in support of the Amendment are very insidious and seductive, but I have no doubt everybody could bring similar instances, in which he could show that a particular individual would be better off if he were allowed to remain under the three years average instead of being immediately assessed upon the current year's income. I am a little startled to hear these arguments, because, if there has been a pressure upon me at all during the course of the past year, it has been the pressure on the part of the great commercial community of this country to have the Income Tax assessment changed from a basis of three years' average to the basis of a single year's computation. Why is that? It is because we are in a time of depression, and that, being compelled to pay upon a three years' average, means in many cases that they are now paying a larger sum than they would be asked to pay if they were assessed upon the basis of, say, the immediate year's earnings. It may be that men are paying Income Tax to-day upon the three years' average when, in point of fact, they have received no income at all in the course of the past year, and the desire at the present time is to get to the one year. But those who have been gradually making more, although they are in an infinitesimal minority, take the other point of view, and wish to get off with a less payment.

Photo of Mr Athelstan Rendall Mr Athelstan Rendall , Thornbury

With the same payment.

Photo of Sir Robert Horne Sir Robert Horne , Glasgow Hillhead

They want to get off with less payment than if this change were made. I am making this change this; year with regard to people who come under the category, more or less, of employed people. I am making this change in order to get rid of the vast confusion which exists at the present time. The change will cost the revenue £500,000, because of the fact that we are now in a period of depression, instead of a period of rising salaries, and we shall suffer accordingly, by reason of the fact that the great majority of people will be able to be assessed upon a less amount than under the three years' average. My hon. Friends are asking us to suffer a further burden. They ask it on behalf of the people who, instead of going down in the ratio of salary, are going up. My heart may be moved, but it is not so greatly moved as the hearts of my hon. Friends in that particular case. I think the man whose salary is rising is certainly in a better position to pay than the man whose salary is coming down. The latter is relieved by this operation, and, accordingly, I must resist the Amendment.

Amendment negatived.