That is another matter, and it shows that I am not at my brightest and best that I have not called attention to their absence. After one o'clock in the morning I enter this field with even greater trepidation, but I feel bound to raise the matter even at this hour because owner-occupiers in Scotland have felt a great deal of concern about it. I have had correspondence with the Financial Secretary about it and I should like to thank him for his letters.

Many owner-occupiers when they received a Schedule A form for Income lax at the end of last year found that they were being charged with certain sums. They were worried and could not understand this because they thought that with the abolition of Schedule A there would be no more tax to pay. They could not understand why they had to pay a certain proportion of their Income Tax in January. Many of them spoke to me about it at the time and I believe that my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) had a Question down on the subject. People then began to have a vague understanding that in future feu duty would not be allowable as a general charge against income and that Income Tax would be payable on it. This meant in a number of cases, where assessment under Schedule A was offset by maintenance charges, that people found themselves worse off as a result of the abolition of the Schedule A assessment than they were prior to that abolition. I am indebted to my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), who has very nobly tried to assist me to understand this matter. I am not sure that I have been a good pupil, but that is no fault of his, and I have no doubt that, if he catches the eye of the Chair later on, he will be able to explain matters much better than I can.

1.15 a.m.

As I understand it, the history of the matter and the Government's argument on it go something like this. Prior to 1940, feu duties were not intended to be treated as a general charge against income, that is, any kind of income, but only as a set-off against Schedule A tax which was paid. Feu duties were originally, prior to 1940, paid gross. Therefore, if Schedule A tax was assessed at tax on £20 and there was a gross feu duty of £10, Schedule A tax would be reduced to tax on £10. If Schedule A tax was not payable, because of maintenance claims, then feu duty was payable gross and there was no further adjustment; in other words, there was no tax allowance for that feu duty paid. That was the law. But the practice, as the hon. Gentleman admitted in his letter to me of 9th June, was rather different. The practice was that it was allowed as a charge against income.

In the Finance Act, 1940 by Section 17—and later, in the Income Tax Act, 1952, by Section 177—there was a change providing that feu duty would be paid net. In that case, with a Schedule A assessment of £20, Schedule A tax was payable on £20 but tax deducted from the feu duty of £10 was retained as a set-off. If this had been the only change made in 1940, then, where no Schedule A tax was payable, the tax deducted from feu duty paid would have had to be paid over to the Revenue.

In 1940 another change was made which, according to the Government, was a mistake, namely, that the feu duty became a general charge on income. Even so, there was no effective change when Schedule A was payable, but when Schedule A tax was not payable, because of a maintenance claim, the tax deducted from the feu duty paid was not accounted for to the Revenue.

This unexpected result, according to the Financial Secretary's letter to me of 4th May, would have been of only minor importance if maintenance claims eliminating Schedule A tax altogether had been few; but, because Schedule A valuations remained at the pre-war levels and the cost of repairs continued to rise, the number of cases in which Schedule A tax was eliminated altogether increased. Therefore, the anomaly of allowing feu duty as a general charge against income increased in importance. This was the position prior to the abolition of Schedule A.

The opportunity was taken when Schedule A was abolished, in 1963, to put this matter right, by providing that feu duties would no longer be treated as a general charge on income.

As I understand it, that is the Government's argument. I hope that I have stated it correctly.