Christmas Bonuses (Income Tax)

Oral Answers to Questions — National Finance – in the House of Commons at 12:00 am on 12th December 1944.

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Photo of Mr Irving Albery Mr Irving Albery , Gravesend 12:00 am, 12th December 1944

asked the Chancellor of the Exchequer, in view of the confusion caused in the public mind by recent announcements concerning the liability to tax of Christmas gifts and bonuses in kind, cash and savings certificates, whether he will make a statement elucidating the position.

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

Christmas bonuses paid to employees are liable to Income Tax, whether payment is made in cash or in something such as savings certificates, which can be turned into cash. Where, however, an employer makes Christmas gifts of goods to his subordinate employees the value of the goods is not treated as taxable remuneration: and in cases where it has been customary for an employer to make such gifts in kind but, because of war conditions, he decides to substitute gifts of equivalent value in the form of savings certificates, savings stamps, National Savings gift tokens or direct credits to savings bank accounts of the employees, the value of the gifts so made is not treated for Income Tax purposes as income of the recipients.

Photo of Mr Irving Albery Mr Irving Albery , Gravesend

Did not the right hon. Gentleman on a former occasion explain to the House that there were large contributions made in savings certificates, under arrangements which certain firms made, which were not subject to Income Tax? Has the procedure been changed?

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

There has been no change, but there has been a certain misunderstanding of statements that have been made, and I am glad of the opportunity of clearing the matter up in the comprehensive reply I have just given.

Photo of Mr Arthur Woodburn Mr Arthur Woodburn , Clackmannan and Eastern

Are not these gifts encashable next day, should the recipients so desire?

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

Of course they are, but, as I have explained, this is in the nature of a very special concession of a limited character. If it were abused, one would have to consider withdrawing it.

Photo of Mr Reginald Purbrick Mr Reginald Purbrick , Liverpool, Walton

Can these gifts in cash be deducted by the employer in respect of his Income Tax?

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

Yes, Sir, in the same way as any other payments made to employees.

Photo of Sir Godfrey Nicholson Sir Godfrey Nicholson , Farnham

Is my right hon. Friend aware that some businesses, especially family businesses, have been used to making presents, sometimes in the form of cash, to old and valued employees; and is it not hard if these are now to be charged with tax?

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

As I have explained in the answer, payments made in cash by way of Christmas bonus have always been regarded as liable to tax.

Photo of Commander William King-Hall Commander William King-Hall , Ormskirk

Can my right hon. Friend explain why it is that the bonus paid consistently throughout the year is not subject to tax, but that when it becomes a Christmas present it is subject to tax?

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I have no knowledge of bonuses paid throughout the year which are not liable to tax.

Photo of Commander William King-Hall Commander William King-Hall , Ormskirk

Is it not a fact that the allowances made by firms to employees in order that they shall purchase War Savings Certificates at reduced rates, allowances which in some cases have risen to 50 per cent. of the cost of certificates, are bonuses payable throughout the year?

Photo of Sir John Anderson Sir John Anderson , Combined Scottish Universities

I am not aware that they are not liable to tax.

Photo of Mr Francis Bowles Mr Francis Bowles , Nuneaton

Is the reply solely concerned with employees? If I were given a present by a grateful client, would that also be taxable?