How Incomes are Assessed for the Tax - Deductions Allowed on Life Insurance Policies - No Deductions on Allowances Paid by Husbands to Wives - Deductions on Children -The Incomes of Married Persons - Free Occupation of a House - Allowance for a Servant - Annuitants Pay

Income Tax - The Occupation of a Police Station

Exemptions

The Income Tax Acts apply to the whole of the United Kingdom, but the original Act is so badly drawn that its meaning is often obscure, while none of the Acts contain the equivalent terms of Scots or Irish law, although they affect these countries. A person whose total annual net income from all sources does not exceed I60 is exempt from duty, and when the total income exceeds I60 but does not exceed 700, allowances by way of abatement are made by deducting a specified sum from the total income and charging the duty upon the balance only. Thus, from an income of

40.0 a year I60 deductible, and 240

500 » 150 the tax Payable-35° 600 „ I20 the taxdpayable 480

700 „ 70 upon 630

Life Insurance

Any person who has insured, or who has contracted for a deferred annuity upon his own or his wife's life, or who is liable to the payment of an annual sum or to have an annual sum deducted from his salary in order to secure a deferred annuity to his widow or provision for his children after his death, is entitled to deduct the amount of the annual premium paid by him or of the annual sum deducted from his salary, not exceeding in all one-eighth of his total taxable income. The deduction cannot be made so as to bring the income below I60. But where the company advances the premium as a loan on the security of the policy, and credits the premium as paid, the person who is insured is not entitled to deduct such premium, as it is not "paid by him" within the meaning of the Act.

Alimony

When an action for divorce was compromised by a deed of separation, and where by a supplemental deed the husband agreed to pay to the wife 450 per annum, it was held that the husband might deduct income tax from the annuity. By an agreement for separation between husband and wife, the husband undertook to make his wife an . annual allowance payable quarterly in advance " clear of all deductions," but it was held that the husband was entitled and bound to make, and the wife was bound to allow, a deduction of income tax in respect of each future instalment of the annuity.

The Earl And The Countess

A husband and wife agreed to live separate, and the husband agreed to allow her 4,000 a year, clear of all deductions, which sum was subsequently reduced by agreement to 3,000 a year. Then disputes arose as to how long the reduced allowance was to continue. The wife brought an action to recover arrears of the allowance, and a consent order was made that she was entitled to the 4,000 a year as from a year before the action commenced. The husband

Law had never deducted any income tax from any of the payments of the allowance, and he now claimed to deduct income tax in respect of all the payments made, and from the arrears. It was held that he might deduct income tax from the arrears, but not from the payments already made.

Children

The claim must be made within three years, and where the deduction has not been made the amount is repayable. The amount of a person's income is to be reckoned inclusive of any sum deductible in respect of premiums upon life insurance and annuities.

The parent of living children under the age of sixteen, including stepchildren, whose income does not exceed 500 is entitled to an abatement of I0 in respect of each child. An individual who claims and proves that his total income does not exceed 2,000, and that any part of that income is earned income, is entitled to relief to the extent of taxing the earned portion of the income at the rate of 9d. instead of Is.2d., and this is in addition to any other relief to which he may be entitled. The claim must be made before September 30.

A person whose total income exceeds 2,000 but does not exceed 3,000 is chargeable in respect of his earned income at the rate of Is.

Where a wife's profits are deemed to be profits of the husband, an individual as above includes either the husband or the wife. Upon incomes exceeding 5,000 a super-tax is now imposed at the rate of 6d. for every pound of the amount which exceeds 3,000.

Husband And Wife

The profits of a married woman living with her husband are to be deemed the profits of the husband, and charged in his name. The Income Tax Commissioners treat husband and wife as one, so that their joint income, if it exceeds I60, becomes chargeable to duty, although the income of each taken singly would not be chargeable.

Where the total joint income of the husband and wife does not exceed 500, and part of the income is derived from profits of a business carried on by means of the wife's personal labour and the rest derived from another business carried on by the husband, a claim for relief is to be dealt with as if it were a claim in respect of the profits of the wife, and a separate claim on the part of the husband in respect of the rest of the total income.

"Business" means a profession, trade, employment or vocation, office, or employment of profit.

When a wife is living separate from her husband, whether her husband is temporarily absent from her or from the United Kingdom or otherwise, and she receives any allowance or remittance from property out of the United Kingdom, she is to be charged as a single woman if entitled to the money in her own right, and as the agent of the husband if the money comes through him or on his credit.

Free Occupation Of House

A person is chargeable for income tax not on what saves his pocket, but on what goes into his pocket. In the case of a bank agent whose income was under 400, exclusive of any estimate of the value of the part of the bank which he occupied as residence, and which he was not entitled to vacate or sublet, it was held that the value of the house was not to be taken into account, and that he was entitled to the abatement of I20.

Allowance for Servant

Where a man and his wife were appointed master and mistress of a national school at a joint salary, and the man claimed an allowance of 30 in respect of the board and wages of a domestic servant whom it was necessary that he should employ in order that the duties of his household might be carried on whilst his wife was engaged professionally at the school, the deduction was not allowed.

Annuity

A testator gave to his wife an annuity or clear yearly rent charge, clear of all taxes and deductions, and it was held that the annuity was subject to property tax. The gift of an annuity, clear of legacy duty and every other deduction for legacy duty or otherwise, will not authorise the payment of the income tax out of the testator's estate. A bequest to pay a clear yearly sum, free from all deductions and abatements whatsoever, does not render the annuity payable free from income tax.

If a testator by his will grants a rent charge to be paid free of income tax, the annuitant is entitled to have the full amount paid without deduction of the tax. When a testator directs an annuity to be paid out of his personal estate "without any deduction whatever," the income tax is payable by the person who receives the money.

A testator by will directed his trustees to pay to his widow during her life the annual sum of 500, "free from legacy duty and other deductions," and it was held that the annuity was subject to income tax, to be paid out of the annuity itself.

Occupation Of Police Station

A police superintendent who is obliged to live in a house within the boundary of the police station, but separated from it by a wall, he keeping the keys of it and furnishing it, and a deduction being made from his salary for its use, is not liable to pay income tax in respect of it.