(1) The following paragraphs shall be substituted for paragraph (3) of Rule 8 of No. V in Schedule A (which grants relief in certain cases in respect of the cost of maintenance, repairs, etc.): —
(3) This Rule shall apply to any land (inclusive of farmhouses and other buildings, if any) or house, the assessment on which is reduced for the purpose of collection:
Provided that no repayment of tax shall be made under this Rule in respect of the cost of maintenance repairs, insurance or management, if or to such extent as that cost has been otherwise allowed as a deduction in computing income for the purposes of Income Tax.
I beg to move, in Subsection (1), after the word "house" [" or house, the assessment on which is reduced"], to insert the words "where the owner or the tenant is liable for the cost of maintenance, or repairs, or insurance, or management."
The object of the Amendment is to do away with an anomaly which I am informed exists and which consists of this, that if the tenant does the repairs and the owner pays the insurance he has to pay Income Tax on the insurance and cannot deduct it, whereas if he does the repairs he can deduct the insurance. It seems to me it is rather absurd to say in one case that he can claim a deduction for the amount he has paid in insurance and in another case he cannot do so. I understand where the tenant does the repairs a certain sum is deducted from the gross rent for repairs. It is supposed that that sum includes insurance, but as a matter of fact it does not do so.
I think this Amendment goes a little further than my right hon. Friend thinks it does. The word "management" ought to be explained. What does the Bill mean by management? Yesterday, when we were debating the concession given to the owners of mining royalties, I pointed out that the owner of a house is not allowed to deduct in respect of Income Tax any abatement for the cost of employing a person to collect rents, or for overseeing the condition of a house let on a full repairing lease, or for collecting ground rents. I should like to ask the Chancellor of the Exchequer whether I understood the Solicitor-General correctly yesterday that the concession for collection which was given to the mining royalty owner in regard to Income Tax applied to the owners of property. If that is so, we ought to have it cleared up at once so that we may know what the word means.
It will depend entirely upon circumstances. If you employ a factor to manage your property, which is the way it is ordinarily done, "other business" includes collecting the rents, and taking the whole thing together, the expense would be included in the expenses of management. On the other hand, you raise an entirely different issue, as I take it, though it would be for the Law Courts to decide, where an individual employed no one to collect his rents but collected them himself. Under those circumstances, it would be difficult to include the collection of rents under the head of management. Probably this word "management" has received interpretation before. At least, it has been in operation with regard to these allowances for many years, and I should think in practice its meaning is fairly well known by this time.
I am not prepared to give a competent opinion on that question. My own prima facie view is that the mere collector of rents can scarcely be described as the manager of the property, and, accordingly, the mere collecting of rents would not come within the category of management. If a man who is managing property includes in that the collection of rent, that expense would be allowed in the deductions TO be made.
Take this concrete case which I put yesterday. A trustee holds, among other investments, a provincial property which brings in £250 rent net, without any deduction whatever by the tenant, under a long leasehold term. He cannot go into the country to collect that rent, and he cannot go from time to time to see if the gutters and drains are in proper repair. He therefore employs a local estate agent and pays him £10 a year to collect the rents and look after the property. He receives £240 net, which he distributes amongst the beneficiaries. Is the property to be assessed for Income Tax on the £240, the amount he actually receives, or is it to be assessed on £250?
I cannot give my hon. Friend an opinion which would necessarily safeguard him in is, court of law, because obviously what I say in my place in Parliament is not relevant in an argument in a court of law, but taking the case my hon. Friend has presented I should prima facie say these would be regarded as expenses of management and would under this Clause be deducted. On the other point raised by the right hon. Baronet that is a different question. The point he makes, as I understand it, is that where a tenant is liable for upkeep and repairs under the terms of his lease the landlord may be paying the insurance and, as the law is at present administered, the expense of insurance is not allowed to be deducted, whereas if the owner is himself liable for the repairs and maintenance the expense of insurance is included in the other charges and is allowed to be deducted.
That again is one of those items in connection with repairs and management which I think is excluded and stands entirely by itself. I should have been very ready to agree to my right hon. Friend's suggestion—after all it is a very small matter—except for the fact that there are repercussions in other directions. If he will not press the Amendment I will have the matter gone into as against the Finance Bill of next year. No case, I think, has been pressed upon the Inland Revenue authorities on this matter and it is not a very clamant grievance, if there is any suffering at all from it, but I promise to take it into consideration and have it dealt with.