I beg to move, in page 9, line 6, to leave out from "persons" to "whose".
The Committee will appreciate that this Clause introduces some concessions with regard to the expenses of Schedule E taxpayers, a matter which was debated in some detail during the debates on last year's Finance Bill. In fact, for a long time past we on this side of the Committee have urged that relief should be given to those who already suffer very considerably in comparison with Schedule D taxpayers by reason of the fact that the subscriptions they make to various professional organisations and learned societies have not hitherto been allowed as deductible expenses for Income Tax.
We recognise that this Clause goes some way, although only a very short way, to meet those past criticisms. In fact, the Economist, in commenting on the Clause in its issue of 24th May said
… although it takes two pages of the Bill and a Schedule … if this is the Chancellor's last word as well as his first, it will be a big disappointment.
The three Amendments which I have put down are intended to remove some of what seem to be the quite unnecessary—
I realised that the other two Amendments to delete subsection (3) and (4) were not to be called. I shall confine my remarks to this Amendment, which is designed to remove one of the restrictions which the Chancellor has unnecessarily introduced. The words to which I object are:
not of a mainly local character".
Those words should be excluded, because if for the purposes of their work people
make contributions or send subscriptions to professional bodies and learned societies which are of a mainly local character, they are entitled to precisely the same relief as if those professional bodies and learned societies were national in character.
It is well known that a great many of these organisations, the learned societies, are of a local character. They are just as deserving of support as national organisations. The concession is modest. Neither the Chancellor nor the Financial Secretary has yet given an estimate of what the concession in the Clause will cost, but I cannot imagine that it will be very considerable. I should have thought that it would have been almost de minimis for the Amendment to be accepted and the ambit of the Clause widened so that local societies and local professional bodies could have the same benefits as national societies.
I support what the hon. Member for Islington, East (Mr. E. Fletcher) has said. It is certainly the case with the large professional bodies that a good deal of the work of the advancement and the spread of knowledge and the maintenance or improvement of standards of conduct is, as a matter of policy, devolved upon local district societies, which are probably mainly of a local character, but which play an extremely important part in protecting the public by ensuring the maintenance of minimum standards of knowledge and conduct.
Whether such a body can satisfy the requirements of paragraphs (a), (b) and (c) of subsection (2) should be the test and not whether the society happen to be in a certain locality. The words which the hon. Member proposes should be deleted should properly be deleted. I warmly commend the Amendment to the Committee.
I add my support to what has been said by my hon. Friend the Member for Islington, East (Mr. E. Fletcher) and the hon. Member for Langstone (Mr. Stevens). I should say at the outset that most of us feel considerable satisfaction that the Clause has been drafted at all, but we are rather surprised that this unfortunate little phrase should appear.
Why are the Government so opposed to local bodies? It is clear that many serve a very useful purpose. As has been pointed out, they also contribute to the maintenance and improvement of standards of conduct and the spread of knowledge and learning. Why is the position changed if it happens to be a local body?
I can give a simple illustration. A doctor can discuss a case and other matters with his professional colleagues at the Royal Society of Medicine, because that is a national body; but an equally useful body, the Chelsea Clinic Society, is completely ruled out because of this unfortunate phrase. I am sure that the Financial Secretary will appreciate that many of these useful bodies require the physical presence of their members to derive the maximum benefit. What will happen, say, to a Liverpool lawyer if he can get this concession only if he belongs to a national organisation? Why cannot he discuss matters of law at the Liverpool local society? Why should a doctor who lives in Aberdeenshire have to go to Edinburgh or to London before he can discuss cases and increase his knowledge with the help of his colleagues? It seems to me that the economy involved must be negligible, so that it can hardly be for financial reasons that the Government would wish to dissociate themselves from the Amendment.
The Clause, as drafted, will literally strangle these very useful learned local societies, and it seems to me that it would be very unfortunate if that should happen. I feel sure that the Financial Secretary will be prepared to leave the whole matter to the discretion of the Commissioners of Inland Revenue, as indicated in subsection (2), instead of retaining these unfortunate words which so severely limit their discretion. This is a very useful Clause and most of us on this side of the Committee are very satisfied with it, but it has this small imperfection, rather like a wart on the Mona Lisa's nose, and if the hon. and learned Gentleman will deal with that, we shall be very satisfied.
May I ask one question of the hon. and learned Gentleman before he replies to the debate? Suppose that there are bodies of persons who, apart from this phrase, would be approved, and that these bodies carry on precisely similar activities in the following areas. Would be tell me which of them would be of a mainly local character? First of all, England; secondly, Scotland; thirdly, Wales; fourthly, the Channel Islands; and, fifthly, Northern Ireland.
I am very grateful for the general reception that this Clause has obviously had. I think it will be of value to a number of professional men for whom the operation of the Schedule E expenses rule has been a source of genuine grievance; and, indeed, it goes beyond professional men.
The hon. Member for Islington, East (Mr. E. Fletcher) asked me the cost of the concession in the Clause. I should not like to be tied to a figure, because it is very difficult to estimate it, but as far as we can estimate, it will be about £1 million. The hon. Member for Loughborough (Mr. Cronin) said, I think quite rightly, it could not be economy which caused the inclusion of the phrase which the Amendment seeks to remove. He is perfectly right there. The reason is not the direct saving in revenue. It is a purely practical one. In all these matters, one has to measure the grievance which is sought to be removed against the burden that its removal would put on the Revenue—the difficulty and the cost of administration; and it is purely because of the disproportion on this count that the phrase has been included.
I think that, perhaps quite naturally, when one finds my hon. Friend the Member for Langstone (Mr. Stevens) agreeing with the hon. Gentleman opposite, one suspects that the reasoning and logic are impeccable, and indeed they are. There is no logical reason why local societies should be excluded. As the hon. Member for Islington, East, said they are just as deserving and just as good a case can be made out for them, until one considers on the one hand the grievance and difficulty their exclusion causes and, on the other, the administrative difficulty of including them in the concession made by this Clause. In theory, any local society should be approved, if it satisfies the test just as much as any national body, but it is when we come to the difficulty of applying the test that we see why it is desirable to exclude the local societies.
Many local societies are primarily of a social or recreational type. At any rate, they have a very strong recreational element, far more so than the national bodies. This is particularly clear, I think, when there is a national body with its local counterpart. I think that any hon. Gentleman who reflects on the nature of the activities of the local body will see what I mean when I say that, generally speaking, there is a strong social and recreational element.
The hon. and learned Gentleman is, of course, aware that subsection (3) deals with that very point, that all matters which do not come strictly within the ambit of subsection (2) are excluded or a certain proportion is removed from the benefit.
I had that in mind. If the hon. Gentleman will allow me to continue, I think he will see the relevance of the point I am making. As we know, even local professional societies are frequently little more than luncheon clubs; at any rate, the luncheon club element is quite strong. One finds it in local scientific societies: the scientific and the social elements are inextricably mixed. There are bodies such as societies of naturalists, photographic societies, local archæological societies, societies of horticulturists, Shakespeare reading societies and so on. It is obvious that, in societies such as those, the interest of members is really in a hobby. The main function of the society or the common interest of the members is the development of a hobby.
I have no doubt that there will be certain members of local societies—for instance, the local photographer's assistant, the local librarian, or possibly, a school teacher—who will be able to say that their interest is a purely professional one. I come now to the point I was making. This Amendment would mean that every single one of these societies would have to be examined by the Inland Revenue in the light of the provision to which attention has been drawn to see whether its activities qualified under the Clause. That is a formidable assignment to give to the Inland Revenue. We reckon that the national societies will probably number about 3,000. Even that is putting a considerable burden on the Inland Revenue, because there is no question but that the examination ought to take place during the six months after the passing of the Finance Bill so that taxpayers can take advantage of the Clause during this financial year. If one adds to that all the local bodies, the administration of the Clause would break down.
How far is it a grievance that they are excluded? I do not controvert what has been said by my hon. Friend the Member for Portsmouth, Langstone, by the hon. Member for Islington, East and by the hon. Member for Loughborough, that one cannot deny that, in logic and on the merits, they are entitled to be included. But, generally speaking, the subscription to these local societies is very small, 10s. a year or something like that. The financial grievance in excluding them is comparatively small for the individual taxpayer.
May I just test what the hon. and learned Gentleman is saying by asking this question? Will he regard a Welsh society or a Scottish society as a purely local society?
I am anxious not to be drawn into saying whether individual societies come within the Clause or not. This is really a matter on which the Committee is entitled to have legal advice, but, for what it is worth, I would say that a national society is not a local society, if I am asked that question. We all know what the local societies, such as the county archaeological society, and the village scientific or horticultural society, mainly are. A national society of the sort that the hon. and learned Member for Kettering (Mr. Mitchison) and the hon. Member for Islington, East asked me about would not be a local society. That is a national society.
If the subscription goes to the local branch, that is a local society. It is a question of where the subscription is paid.
I was dealing with how much grievance is caused by the exclusion. I was pointing out that in the case of local societies or the local branches of national societies the subscription is comparatively small, and in the cases that we have in mind, such as the professional societies mentioned by hon. Gentlemen opposite, those taxpayers will already have benefited very greatly by the inclusion of subscriptions to the national counterpart in the main part of the Clause.
In the context of this year's administration of the Clause it would not be practical in any way to go through all these local societies. It would cause a breakdown in the administration, Therefore, I say that there is no real grievance or hardship, whatever the logic, in the exclusion, and I cannot advise the Committee to accept the Amendment.
I am most disappointed with what the Financial Secretary has said, and I do not think the Committee could possibly leave the matter in the way that he has suggested. There is a very real grievance here.
The Financial Secretary has admitted the case for the inclusion of these local societies on their merits. The only reason that he has given for denying the justice of their claim is an administrative reason. That really will not do. First, the merits of the case are conceded. He says that there is no grievance, but there is. The grievance arises not so much in connection with the professional bodies—which I concede are largely national in character—but in connection with the local societies to which he has made reference—for example, local archæological, geographical and geological societies. Many of these learned societies are essentially local in nature, and the contribution that they make to both academic and scientific knowledge and the general standard of culture throughout the country depends entirely upon local activities.
I speak as a Londoner, and, therefore, I do not suffer; I have the benefit of the learned societies which centre on the Metropolis. But people in Northumberland are interested in Northumbrian archælogy and geology. They have their local societies, local librarians and local school masters and university dons who subscribe to these societies. It is notorious that in these days learned societies are suffering considerably. They have suffered considerably in recent years because of the activities of the Revenue. They used to derive part of their benefit from covenants, but that has now been stopped by a decision in the Court of Appeal, with which the Financial Secretary is no doubt familiar. They have also suffered because some of their premises are rated. Formerly, they used to get the benefit of exclusion from rating, but the law in that respect has now been changed.
The number of people who effectively contribute to these societies in order to maintain their activities, which are of great national advantage, is limited owing to the depletion in people's incomes. However, the cost of running these societies is continually increasing, largely because of the steadily rising cost of printing and publications.
It will not be a very good thing for the culture of the country and for our national scholarship, for which we have been rightly famous in the past and which has depended largely upon amateur, voluntary efforts and upon the contributions of a number of people especially interested in these matters, if they are to be denied the benefit of this concession for purely administrative reasons, especially when the hon. and learned Gentleman agrees that in logic and on merit they should have it.
I am not happy about these administrative reasons. It cannot be all that difficult to examine the nature and affairs of a particular society to see whether it justifies inclusion. Even if there is some delay, it is better that societies should be included than excluded. I do not concede that it is necessary that the whole of the Commissioners of Inland Revenue should adjudicate upon each society. Surely, this is a matter which could be delegated. I therefore hope that if the Financial Secretary is not prepared to make this concession tonight, he will give us an assurance that he will draw to the attention of his right hon. Friend the representations which have been made from both sides of the Committee about this matter.
This is a much more important issue than we at first thought. I believe that the Royal College of Physicians and Surgeons has either "Edinburgh" or "London" in brackets after its name, in which case it is debatable whether that is an Edinburgh or a London society. That would apply to a great many professional bodies.
I should like my hon. and learned Friend the Financial Secretary to consider whether he ought not to accept the Amendment and introduce his qualification in paragraphs (a), (b) or (c). In other words, the issue is not a question of whether it is local persons or whether they are calling themselves or are, in fact, local persons, but whether the advancement or spreading of knowledge is on a wide and not merely national, but international, level, for many of these societies support the interests of their members throughout the Commonwealth, certainly in Ireland and elsewhere.
It seems to me that the correct way out of this difficulty is not to try to discuss whether the society itself is local or purports to be local, but whether its activities, its advancement of knowledge and its maintenance and improvement of standards is directed to the wider field or only locally.
I do not want to delay the Committee, except to say that my hon. and learned Friend the Financial Secretary underestimated the capacities of his own Department in terms of administration. This is the Department of the Inland Revenue which even in wartime could switch over to P.A.Y.E. as an entirely new system, which as soon as the war ended was able on a national scale to produce post-war credit certificates, which in 1952 was to call upon every director and salaried person earning more than £2,000 a year to fill in form P.11D and to examine them without difficulty, and the Department which has managed to lead itself quite easily through all the intricacies of Purchase Tax. To say that there is any administrative difficulty when there are in each area a local inspector and local commissioners of taxes is asking this Committee to believe rather more than it is inclined to do at this time of night.
I should like the Financial Secretary to reconsider this matter. Perhaps he was about to say that he would do so. Let me tell him shortly why I think he should. First of all, the hon. and learned Gentleman says, quite rightly, that he hesitates to express an opinion as to how these words will work.
No, that is not what I said. I said that I would not express an opinion on whether any individual society ranked for relief or not, but I ventured to say that in my opinion, and I have since had this confirmed by the Inland Revenue officials, a national society in the sense of an English, Scottish, Welsh or Irish society or a Channel Island society would not be a local society. It would be considered to rank for relief. It was in relation to individual societies that I did not want to be drawn.
I am much obliged, but I am afraid that that is not the end of the story. There is the difficulty which the hon. Member for Hendon, South (Sir H. Lucas-Tooth) pointed out in his question. What about the difference between a national society, which has branches, and a number of local societies doing in effect exactly the same thing? Surely, there ought not to be a Revenue distinction between those two bodies, and it ought not to depend on the way subscriptions are collected.
We are dealing here with Schedule E cases and cases where the membership of a society has to be relevant to the employment. There is a limiting clause to that effect. Let us take the Law Society. What about people in local government on the legal side who are expected to join the local law society for some purpose or another? It really cannot be right to leave them out; and I am sure that there are parallel cases in other professions, cases which will depend upon the extent to which the research and knowledge side of the profession happens to be organised nationally or locally.
The Financial Secretary conceded very properly that the logic is all one way, in favour of leaving the words out, but he suggested that the real reason for leaving them in was the administrative difficulty of leaving them out. I suggest that the administrative difficulties of leaving them in are quite considerable and that he may find himself involved in a number of very difficult distinctions and troublesome cases, for if one chooses to found oneself on a complete absence of logic a penalty is attached to that.
One thing which the hon. and learned Gentleman might consider is making his own meaning a little clearer in this matter. The words "mainly local character" are not clear to me when one considers particular cases. The hon. and learned Gentleman must remember that he is dealing with people who really ought to be enabled to find out the meaning quite easily. Will he undertake to reconsider the point and see whether some suitable form of words could be devised to make the intention quite clear? It would be even better if he could undertake, in all the circumstances, to abide by logic for once and go the right way. If he cannot go as far, perhaps he will undertake to reconsider the matter before Report, and, if he sticks to his decision, do some elucidation.
I do not want to weary the Committee with another speech at any length, but, in view of the cogent and friendly way in which the representations have been made, it would be less than courteous if I did not reply to one or two points. Perhaps it puts it wrongly to put it as the hon. Member for Islington, East (Mr. E. Fletcher) put it, that the only reason is administrative. In all these matters, one has got to balance the relief to the taxpayer against the cost to the taxpayer. One has to consider the individual taxpayer who may like to get relief in respect of a subscription to a society, and, on the other hand, the cost to the general body of taxpayers if we have to recruit a tremendous accretion to the Inland Revenue staff.
The hon. Member for Islington, East drew attention to the importance of the scientific and learned societies generally. I think he is wrong in saying that they suffer under this Clause. They do not. Equally, with great respect, the hon. Member for Loughborough (Mr. Cronin) put it too strongly when he said that this will strangle useful local bodies. This does nothing of the kind. They are no worse off under this Clause. The only point is that they are no better off. The subscriptions will be paid as in the past. The persons with whom we are concerned are not the local bodies themselves but the taxpayer who may be able to deduct for Schedule E purposes his subscription.
The hon. and learned Member for Kettering (Mr. Mitchison) spoke of the administrative difficulties of leaving out the local societies. I am assured—and I have no doubt at all—that the administrative difficulties of bringing them in are very much greater. However, in view of what has been said, I cannot make any commitment; I cannot say that I will reconsider this matter before the Report stage. It is not for me to do so. But in view of the representations that have been made, and without entering upon any sort of commitment or raising any hopes, I will bring to the attention of my right hon. Friend what has been said.
The question I want to ask my hon. and learned Friend is really the converse of that which we have just been debating. There are some societies which are very small, but there are also some societies which are large and of an international character. I apprehend that when there is an international society based in this country, it is perfectly within the terms of this Clause.
There are, however, some international societies that have their headquarters overseas. So far as I can understand this Clause, such societies are within its purview, and it would be open to the Commissioners of Inland Revenue to allow subscriptions to them to be treated as proper deductions. But I should like to know from my hon. and learned Friend whether that is the intention of the Government. There are cases of societies which are completely foreign bodies, and I do not think that they would be excluded. But I would not press my hon. and learned Friend in such cases.
I am asking about those cases of an international character to which a fairly considerable number of people in this country subscribe. I think that there may be some deficiency in the machinery of the Clause to deal with such cases. The application would have to be made by the body itself as the Clause now stands. It might be a little inappropriate for a body based overseas to make such an application, and in that case it seems desirable that a member of the body in this country should be allowed to make the application. I do not know whether that would call for any Amendment. I should be grateful if my hon. and learned Friend would clear up the point.
As one who during the Committee stage of the last two Finance Bills had the pleasure of moving an Amendment along the lines of subsection (1, b) of this Clause, I give it a hearty welcome. I must say that the debate which we have just had went rather wider than the intentions of those of us who in past years have moved an Amendment to the Finance Bill in this way.
The main intention of those of us who have done so in the past—it has been done primarily by those connected with the Parliamentary and Scientific Cornmittee—was to help those, very often civil servants and others in public positions, who found that in order to obtain a job they had to have certain qualifications. They found, for instance, that they had to have corporate membership of one of the professional engineering societies and that when they had obtained the job the Treasury was unwilling to state that their membership was necessarily part of their duties.
This matter, of course, has been dealt with by subsection (1, b) and the Chancellor is taking the opportunity also to introduce, as I understand, a completely different relief for those who have statutorily or by virtue of their profession to be on a register. This seems to be quite a different point. I am slightly surprised about that, because I should have thought that the condition laid down in subsection (4, a) that the fee payable in respect of registration is a condition of the performance of the duties or office would entitle the taxpayer to relief.
I suppose that there have been cases in which that is not so. A slight doubt has arisen in the minds of the members of some of these societies. One of them arises out of the drafting of subsection (4). I notice that the Liberal Party has put down an Amendment to clarify the point by introducing the word "or" between paragraph (a) and paragraph (b).
I should like to ask the Financial Secretary whether that is necessary. It does not seem that it is. I understand that paragraph (a) refers to the fee or contribution payable in the case of registration whereas paragraph (b) refers to a subscription to a body whose purposes are different and is not a body without membership of which one cannot practise one's profession. I shall be glad if the hon. and learned Gentleman will make that clear, that is to say, that both conditions do not have to be fulfilled.
The only other thing I wish to say is that there is a number of societies and that there will be a good deal of anxiety among them as to which are and which are not included by the Commissioners of Inland Revenue as suitable bodies under subsection (2). I hope that the hon. and learned Gentleman will indicate that, although it is important that the relief is not too widely given, it is at least generously given and is not going to be very narrowly interpreted. Having said that, I think that on the whole the taxpayers who are most concerned with these matters welcome the Clause.
I join other hon. Gentlemen who have welcomed the Clause, the intention behind which has been moved in previous years, as the hon. Member for Edmonton (Mr. Albu) said, by those connected with the Parliamentary and Scientific Committee, particularly the chairmen, one of whom I see in the Chamber.
In welcoming the Clause, I want to underline from this side of the Committee what the hon. Member for Edmonton said about some of the obscurities which worry those learned societies belonging to the Parliamentary and Scientific Committee, particularly in subsection (4). Perhaps the Financial Secretary will give an undertaking to look into the possibility of making paragraphs (a) and (b) clearer, just as he did on an earlier paragraph about which there was some controversy.
As long ago as 1949 I took a deputation of scientific societies to the then Financial Secretary to try to persuade the Treasury to insert in a Finance Bill a Clause similar to this one, and from that point of view I welcome the Clause.
I had not intended to do more than thank my right hon. Friend and my hon. and learned Friend tonight for having gone so far to meet the representations which for nearly ten years have been put to the Treasury, but the more I have considered the Clause the more I have become concerned whether it will achieve as much as those who have been advocating this for so long have hoped and as much as my hon. and learned Friend has suggested it will achieve.
When my hon. and learned Friend talks about the cost to the Treasury being about £1 million in a full year and about 3,000 societies being involved, it is obvious that it is the intention of my right hon. Friend to make a really generous gesture. Yet when I consider what is being done now and relate it to the Clause, I wonder whether any very great advance is being made. I am particularly concerned about the provisions of subsection (4, a).
I want very briefly to remind the Committee of the background. We know the comparison between Schedule D and Schedule E. Under Schedule D a man carrying on his own trade, profession or vocation is entitled to offset against his income expenses which are wholly and exclusively for the purposes of his trade, profession or vocation. He decides what claim he will make in relation to subscriptions, books, periodicals, instruments and even the tools of his trade, and he argues it out with the inspector. If he can persuade the inspector that it is for the purposes of his trade he is entitled to the relief.
Under Schedule E, however, the employed professional man, who may have the same qualifications as the man in business on his own account, has to contend with a phrase to the effect that the expense was wholly, exclusively and necessarily expended in the performance of the duties of an office or an employment.
In the case of an employed person, the word "necessarily" had been interpreted by the Inland Revenue as meaning "required by his employer", so that in the past he has had two fences to surmount. He has first had to satisfy the inspector of taxes that the claim he is making is in respect of something wholly and exclusively for the performance of his duties—not necessarily for the purposes of his profession—and also that it is necessarily so expended, that is to say, that his employer required him to do so. When the Royal Commission considered
the difference between the Schedule D and the Schedule E wording, it proposed that:
… all expenses reasonably incurred for the appropriate performance of the duties of the office or employment
should be allowed. In other words, it amalgamated the two phrases. My right hon. Friend has not found it possible to do that, but he has spent a great deal of time in the past year in considering the matter, and this Clause is the outcome.
As I see it, however, the Clause is liable to do very little more than is already being done at present in practice. The statutory fees in the Fifth Schedule are now probably allowable to any person who makes a claim for them. As for the:
annual subscription paid to a body of persons approved for the purposes of this section …"—
as stated in subsection (1, b)—I suspect that wherever a person is able to satisfy an inspector that membership of a particular society is required by his employer as a condition of employment, he is certainly allowed that.
Therefore, subsection (1, b) read in conjunction with subsection (4, a) seems simply to reproduce the existing practice. In other words, we are once again throwing the professional man into the arms of his employer and requiring him to satisfy the inspector of taxes that his employer is laying down membership of a particular society as a condition of employment.
I hope that my hon. and learned Friend will be able to tell me that I am wrong in this, but if I am not and membership in the case of every one of these 3,000 societies must be incorporated as a condition of employment in individual cases, we are going back to an extremely strict interpretation, which leaves the employee entirely at the mercy of his employer. Some employers are very good and say, "Membership of such-and-such a society will be of use to you as a professional man, and therefore may be of some use to me. Therefore, I shall put it in your contract as a condition of employment that you join that society." Others are more difficult. The nationalised industries and some Government Departments are very chary of putting in such a condition of employment.
If I am right in my conjecture, I am afraid that the Clause will not fulfil its purpose. I very much hope that some further thought may be given to the matter, particularly in respect of subsection (4, a), and that the requirement which makes it necessary for membership to be a condition of employment can be reconsidered. It will be very cramping, and will make the employer the decisive factor in the question, and not the man himself and his desire to improve his own professional and technical qualifications. If further consideration can be given to the matter, nothing but good can come of it.
The temptations to widen this debate into the whole field of Schedule E expenses are very strong, but I think the Committee will be well advised to stick to the Clause. It is true that the Royal Commission did discuss in paragraph 137 of its Report some of the disabilities of professional men in employment. They are not able to claim tax relief on the cost of professional subscriptions. The Commission mentioned magazines and papers and even travel as one of the essentials of many professional men. But unless these expenses were incurred as a condition of holding an office or employment, they are not admissible for Income Tax relief under Rule 9 of Schedule E. I think that was decided in the case of Tate v. Simpson in 1925, which reinforces the strictness of that rule.
If I remember rightly, the Royal Commission made no separate recommendation regarding the expenses of these professional men. In paragraph 140 it suggested a new definition of admissible expenses under Schedule E which the hon. Gentleman has just quoted. But the debate so far suggests some of the dangers that lie ahead if any attempt is made to relax the strictness of the rule under Schedule E. We know that the strict rule under Schedule E and the comparative laxity of the rule under Schedule D constitute some unfairness in the treatment of one taxpayer and another engaged in similar professions and employed in different circumstances; one on his own and the other working for an employer.
I confess that I was anxious when the hon. and learned Gentleman said that there were some 3,000 societies to look at and the cost might be as much as £1 million in a full year. I cannot be sure on what evidence those estimates are based, but I am sure there must be some fairly good grounds for them. My hon. Friend the Member for Edmonton (Mr. Albu) has persistently raised the question in debates on the Finance Bill, supported largely by professional men in public employment. Many of them had to be members of a professional or learned society as a condition of appointment, but were not required to continue their membership after their appointment. Many of them chose to do so for reasons which will be obvious to the Committee. They get no relief for tax purposes for having done so, unless the employing Department or local authority states that it is a condition of holding their office that they continue their membership.
I am a little surprised at the possible range of societies which may now have to come within the review. There seems to be a process which may have to be gone through, though, of course, fundamentally the onus lies on the taxpayer who is a claimant. He is the person who has to claim relief on the subscriptions he pays, and in the last resort it is he who must prove his case to the satisfaction of the Inland Revenue. The society itself will be interested obviously in settling its accounts for the Inland Revenue in order to save a number of people who may be claiming tax relief on their subscriptions from pursuing their claims separately and independently.
Even when the society has been established as one admissible under the Clause, it will still rest with the taxpayer to satisfy the conditions under subsection (4). As I am no lawyer, I can only read this in a commonsense way, and my interpretation is the same as that of my hon. Friend the Member for Edmonton—that paragraph (a) is one thing and paragraph (b) another; that they do not go together and are quite distinct things.
The trouble will not come in paragraph (a) but in paragraph (b), where there are words that will make an absolute picnic for the lawyers one fine day—
… are relevant to the office or employment, that is to say, the performance of the duties of the office or employment is directly affected by the knowledge concerned or involves the exercise of the profession concerned.
There it is. One can begin to put interpretations upon that, but it does
narrow the claim of a taxpayer to have his subscription admitted.
The man who merely goes round with a butterfly net and is a member of some society that looks after people who go round with butterfly nets will have no claim unless the performance of the duties of his office or employment is directly affected by the knowledge that he will gain by going round with a butterfly net and by being a member of a society that deals with people who go round with butterfly nets. It will have to have something to do with the man's job.
It might help all round—administratively as well—if the Inland Revenue could compile some notes for the guidance of societies, and of claimants, that might assist them in deciding whether to ask to be considered. I realise that, with a provision in the Clause for the right of appeal, the Revenue will be naturally cautious not to put out anything that might be construed to lay down the law, but surely something can be said that will assist people to know how the Commissioners of Inland Revenue will view applications, enlarged somewhat by giving examples, if they can, of the kind of thing they have in mind. That might save a good deal of work—and I am the last person to minimise the additional work which this might create in the Inland Revenue.
I do not know whether the Financial Secretary has seen the Accountant for 10th May, but in commenting on the Finance Bill, in rather caustic terms, this observation was made:
Outside the quasi-statutory subscriptions described in the Fifth Schedule, it is going to be quite a feat la obtain any allowance.
That seems to be at variance with the estimate of the Financial Secretary, and with the hopes and expectations so far reflected in some of the speeches. Therefore, I think that any assistance that the hon. and learned Gentleman can give to intending applicants under the Clause as a denial of the rather severe criticism that I have just quoted—or the implications of what I have just quoted—might be helpful. Perhaps it would be just as well if he also were to say that, for the time being, no further applicants need apply for relaxation of Rule 9 under Schedule E. I can only assume that the Chancellor has decided, quite deliberately, that he will go thus far, but, for the moment, no farther.
I am very grateful for the way in which this Clause has been received. It has obviously been welcomed by hon. Members who have been pressing for some concession in this field; although I was disappointed that my hon. Friend the Member for Putney (Sir H. Linstead), having originally welcomed it, should then have expressed apprehension that it would not effect any improvement in the final position. I hope to reassure him in the course of my remarks.
My hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) asked three questions. The first related to societies of an international character, large societies which might have their headquarters abroad but which operated in a number of different countries. So far as I can see, and I am so advised, there is no reason at all that they should not rank for relief. They can certainly come prima facie within the phrase
a body of persons not of a mainly local character
provided that they satisfy the remaining stipulations in the Clause. He mentioned also completely foreign bodies. Again, I see no reason that they should not rank equally for relief. He did say, however, that there might be difficulty in the case of such bodies in the way of applications from the bodies themselves, and he suggested that, in their case, the member concerned should be able to make the application. I do not doubt that the initial investigation by the Inland Revenue could be made at the instance of the member. After all, he has the same right as any other taxpayer to approach the Inland Revenue; but in the end, the application must come from the society, because only the society can give the requisite information to satisfy the Inland Revenue that the requirements of the Clause are being complied with. I think that the hon. Member for Sowerby (Mr. Houghton) referred to this point also.
The hon. Member for Edmonton (Mr. Albu), who was very closely concerned in the discussions and debate which led to the formulation of the Clause, asked, first of all, a question about the scope of subsection 4 (a), as also did my hon. Friend the Member for Clitheroe (Mr. Fort). The point was spelt out very clearly by my hon. Friend the Member for Putney. I think I ought to deal with it right away. My hon. Friend the Member for Putney went as far as to say that it was liable to do little more than is done at the moment by administrative action, that it reproduces the existing practice and leaves the employed man entirely at the mercy of his employer.
As I read the Clause, and as I am advised, that is not correct. It is true that, in the past, it has been the practice to allow a subscription to a professional society where the employer has made continued membership a condition of holding the appointment. But that is not a condition under this Clause. Subsection 4 (a) does not make it a condition that the employer should stipulate for membership. It is sufficient that the registration must be a condition of the performance of the duties. The views of the employer are no longer material, no longer necessary and no longer relevant.
The next point made by the hon. Member for Edmonton was an echo of an Amendment which has not been called, but which arises perfectly properly on the Motion, "That the Clause stand part of the Bill", namely, whether there should be the word "or" between paragraphs (a) and (b). The hon. Gentleman is quite correct in saying that they deal with quite different matters. Paragraph (a) deals with the registration fee, and (b) deals with subscriptions to the body. I do not think that it would matter if one did put in the word "or". On the other hand, with great respect to the representative of the Liberal Party, the hon. and learned Member for Cardigan (Mr. Bowen), who is here this evening, I think that it would not really add anything to the Clause.
Finally, the hon. Member for Edmonton and my hon. Friend the Member for Putney asked whether this would be narrowly interpreted by the Inland Revenue. The hon. Member for Sowerby quoted the rather caustic phrases used in the Accountant. I think that it must be quite clear from the figures I gave of the number of societies whose applications the Inland Revenue expects to have to consider—not all of which, of course, will qualify—and particularly of the estimated cost of the concession, that the Clause will not be restrictively construed by the Inland Revenue. It will be construed in a commonsense way in the spirit in which it is drawn, in other words, with a desire to assist professional men who can bring themselves fairly within its terms.
The only other points arose in the speech of the hon. Member for Sowerby. I do not feel the same difficulty as the hon. Member about the wording of subsection (4, b). If the Inland Revenue chose to construe the Clause restrictively, I do not doubt that there could be a spate of litigation. I do not think, however, that the words are difficult of construction. Certainly, the meaning is quite plain. The passage which states
… the performance of the duties of the office or employment is directly affected by the knowledge concerned or involves the exercise of the profession concerned
is simple English and none the worse for that in an Act of Parliament. I think that the Committee understands what it means, I do not doubt that the Inland Revenue, or the Commissioners, if necessary, will understand what it means and I hope that it will not be necessary in many cases to have recourse to the courts for its interpretation, although, of course, there is the right of a taxpayer to invoke the law if he is dissatisfied with the ruling of the Inland Revenue.
Finally, the hon. Member suggested that the Inland Revenue might compile notes. I will certainly consider that in the course of the next few days and before the Bill passes into law. I do not, however, think that it would be appropriate in the case of this Clause, because there are many different types of society. The simple thing is that it should be known that any society can write to the Inland Revenue stating its activities and its objects and the Inland Revenue will give a ruling in each case. I cannot help thinking that that would be more useful than the compiling of notes where one has to deal with such diversified activities.
Having said that and having, I hope reassured my hon. Friend so that he can join with the other Members of the Committee in unfeignedly welcoming the Clause, I commend it to the Committee.