INCOME TAX IN ALTRINCHAM BEFORE THE FIRST WORLD WAR

Stephen Matthews

This paper is based upon three Inland Revenue notebooks, salvaged by the author, long after they should have been thrown away under normal Departmental rules.  Their survival depends upon the fact that if you put something in a store room and leave it, it will stay there until the room is needed for some other purpose! [i]

In the early years of this century, Altrincham does not seem to have merited a tax office of its own but formed a part of Manchester 8 which covered a vast area, not only Altrincham and Sale but Lymm, Withington & Didsbury through to Pendleton.  Not long after the end of the First World War this must have changed for the title on the latest of the three books, which runs through to the middle twenties, has been altered from Manchester 8 to Altrincham, and from f13 onwards there are no more entries for the inner suburbs.  From then on the District took on something like its present shape, though it was to lose Sale permanently, lose Wythenshawe in the 1930's and then regain it in the early-eighties.  For this paper, I have almost entirely confined my references to entries relating to Altrincham itself, Bowdon, Hale and Timperley.  Where I have used material from elsewhere, that fact is noted.

The notebooks themselves are far from a complete record of the Surveyors' activity but before looking at them more closely it would be as well to clarify the roles of the various parties.  Assessments were allowed or made by the Additional Commissioners, then as now a lay Tribunal of local people.   The General Commissioners heard appeals against those assessments.  The Surveyor was the predecessor of the Inspector that we know now, the title being changed after the First World War in a general retitling as a reward for war time effort.  His function was different, for he acted as a monitor upon the efforts of the Commissioners.  Although the Surveyor proposed a figure to be assessed, the power to make assessments in his own name was not given to the re-named Inspector until 1964.

There were also Inspectors, in Somerset House, to whom the Surveyor reported, notably, in this context, when there were Back Duty Settlements to be made.

The main tax record would have been the annual assessment books to which each entry is cross referenced and there were certainly other books, as we shall see.  They have not survived but were destroyed when they should have been.  Of the three that I have, two are described as 'Surveyor's Notebook' and the description on the inside covers shows that they are a record of

'All inquiries not recorded in the Schedule D assessments, and all out-door inspections relating to income tax; and should contain notes of the personal inquiries made by the Surveyor with regard to new or additional liabilities, and decreased returns, together with the results thereof.....A second book is to be kept for recording cases of Unassessed Duty reported to the Board with the amounts due for each year and dates of report.'

The first of these two notebooks runs from 1908 to 1909, with 52 entries from all parishes. Mr E. G. Edwards was the surveyor. Mr James Todd was the surveyor whose name is given in the second, which runs from 1909 to 1911, with 58 entries. Some of the enquiries lead to an increased tax bill; some returns were accepted; some assessments were reduced. They were routine enquiries of the kind still made now. A number revealed more serious offences and where that happens there is a cross reference to what was until recently known as the Back Duty Notebook.

I did not find a Back Duty Notebook but the third book which I recovered is the 'Surveyor's Record of Unassessed Duty', running from 1910 to 1928. This also has cross references to Back Duty Notebooks and its entries are those where there was a tax recovery for past years as opposed to the current year corrections which stayed in the Surveyors' Note Book.

There seem to have been two levels of enquiry: routine current year enquiries whose outcome was not reported to the Board and recoveries (Back Duty) where a formal settlement was made with the Board, possibly with penalties. 

I have drawn an arbitrary line at the start of the First World War - more precisely at the end of 1914.  It is not clear what happened during the war.  The first two notebooks do not cover that period but the 'Record of Unassessed Duty' runs to 1928.  The 10 folios up to the end of 1914 contain 40 reported cases over a 51 month period; the next 2 show only 5 reported settlements, all of them completed by October 1915.  Of those 5, one was from Hale and the other from Timperley.  The Book does not then seem to have been used until a group of entries was made in 1919 at about the time I believe the District was divided.

The complete stop to investigation is surprising for, at least according to Basil Sabine, resources were still available despite the strains of war.  He noted that there was a

'massive increase in staff during the war period; even so, the work burden was considerable.' [ii]

It is probable that there was some separate wartime record but if so, why return to the old record after the war and carry on as if nothing had happened?  After the gap period the entries continued until successive Surveyors noted that individual entries and eventually the complete book had been closed with dates of May 1926 and finally probably February 1929.  There is nothing to explain the temporary closure or disuse in 1915.  Furthermore, the 5 entries on f13 look as if they had all been made at the same time, either copied from another ledger or reflecting a sudden resurgence of activity.  It may be that Manchester 8 suffered particular difficulties in maintaining vigilance during the War.  The evidence available does not provide an answer.

So much for the books themselves.  What do they reveal?

An insider, whether looking at them as an Inspector or as a tax advisor might say that very little has changed.  The surveyors queried the returns of a wide range of taxpayers and very often met the same mistakes and explanations as the Inspector does today.  The two Note Books reveal that the Surveyors made 55 investigations spread over 31 occupations, ranging from surgeons to plumbers, from corn millers to land speculators, as well as interest received and income from assets held overseas.  Regrettably, even Church of England clergymen failed their examination, though none of them were in Altrincham or its surrounding parishes.

Of the total 55 investigations, the surveyors were able to reject 34 returns (61.8%) but accepted, or were obliged to accept 21 (48.2%).  Of those they rejected, 16 (29%) were sufficiently serious for the Surveyor to make a formal report to the Board.

It is worth noting that 35 of the 55 entries were for Altrincham and that must indicate its economic size relative to the other three parishes.  The notebooks refer to enquiries about 31 occupations or activities but whilst these give us a limited picture of how people earned their living in the area, the sample is too small to replace the comprehensive view that can be gained from contemporary trade directories.  I will not therefore explore the variety of occupations in its own right but turn instead to how the Surveyor set about his task.

Irregularity was spread fairly evenly over the occupations.  Of 5 builders' returns, 3 were accepted but 2 were found to be incorrect.  All 3 plumbers failed the Surveyors' scrutiny, 2 badly enough to be reported to the Board.  The two innkeepers were evenly split but the sole victualler let the side down.  The two surgeons were also evenly split, but both dentists' returns were wrong.  Perhaps the most surprising outcome, given common perception, was that the returns of both land speculators turned out to be correct, although one only after a formal appeal to the Special Commissioners.

It is possible to detect some element of condescension in the Surveyors' decisions, perhaps reflecting a more charitable attitude towards the book-keeping ability of the average tradesman.  One firm of builders returned a loss which the Surveyor did not accept and the Commissioners fixed an assessment of £1100 after an appeal hearing.  That was the end of the matter despite the large difference.  Another grocer cum baker had to settle for £400 instead of the £150 he had returned but he escaped with paying the tax and a warning of penalties in the future.  By contrast, both the individuals who under declared bank interest were registered as formal Back Duty cases, even though in the end one had to pay only £12-6-2, albeit over 12 back years.  If we throw in a cotton agent, a man of standing, who was formally registered although owing only £31-17-6, and one of the vicars from outside the four parishes, who omitted an annual £100 stipend as well as substantial fees, we can perhaps detect a feeling that the gentry and professionals should know better and should therefore be punished more severely.  Whilst this theory is tempting, we must remember that the Surveyor did not formally report either dentist or the surgeon; probably his reason was the same as for tradesmen, that a current year accounting error was not seen as culpable.  I return to this aspect later.  Perhaps also he had personal reasons for not wanting to upset them too much!

This attitude towards record keeping does point towards the difficulty in establishing what in current jargon is called a 'penalty position'.  Since there was no legal obligation to keep books of record the Surveyor seems to have accepted that it would be seen as unreasonable to punish a taxpayer for an understatement that arose from a failure to keep them.  Not only was there was no law requiring taxpayers to keep books of record, but in fact the Surveyor had virtually no powers.  His strength was that he might persuade the Commissioners to increase the assessment and they  had very wide discretionary powers in what they might accept as evidence in support of an appeal.  Basil Sabine states the system very neatly:

'In many districts, very few accounts would be submitted except those of registered companies, or figures, more or less accurate, furnished in support of appeals. If a Surveyor was bold enough to ask for accounts in support of a Return and the taxpayer complained, an Inspector might well be sent from Somerset House to interview the complainant and effect a compromise settlement.' [iii]

The Surveyors had to achieve their ends by persistent persuasion and using the Commissioners' ability to raise a bigger assessment to bring the reluctant taxpayer into line.  One such occasion was in 1909.  The Return had shown £350, and the assessment was originally on £450.  The Surveyor enquired:

The record shows that the Surveyors used the threat of the Commissioners' powers effectively, for they only had to refer 6 taxpayers to them because of a refusal to produce accounts or returns.  One refusal, from the Solicitors to a firm of Corn Millers, was quite blunt:

There was then a cross-reference to the next Note Book when the review was re-opened the following year and eventually £175 Back Duty was paid.

Given that kind of support from the Commissioners, it is not surprising that most taxpayers responded either by producing accounts or making their books available for the Surveyor when he asked.  In addition, since the Commissioners were local men of influence, taxpayers might not wish to be brought to their attention as inattentive or dishonest in their tax affairs.  The successive entries in which the Surveyors did ask for accounts, and obtained them without complaint, suggests either that Basil Sabine exaggerated a little or that the Altrincham Surveyors were skilful operators who knew what the Commissioners felt to be fair, and kept their support by taking care not to exceed it.

The Commissioners did not always support the Surveyors.  They were also involved 6 times in disputes where the Surveyor and the Taxpayer could not agree upon a figure for assessment.  In 3 cases there was no appeal against the additional assessment which was raised at the Surveyor's request, in one the General Commissioners reduced an assessment from £2000 to £1100; in another they reduced an assessment of £700 to £450.  We do not know the reason for their decision but it probably left both parties dissatisfied for the accounts produced in support of the appeal showed a profit of £153.  In the last appeal the Special Commissioners discharged altogether an assessment upon a Hale man dealing in land.

The individual Surveyor clearly made up his mind on subjective rather than mechanistic factors and the notes reveal that they recognised and understood the problems of the untutored shopkeeper.  Side by side with strictures about the lack of records, they also noted errors arising through sheer ignorance.  It is easy to see why they preferred to take a more formal line with matters like the omission of interest where there was no real excuse for a failure by a literate person to copy the correct figures from his bank book onto his income tax return.

Some of the comments show the failings that the Surveyor met when examining Returns.  As we shall see later, a builder's books were less than perfect with incorrect work in progress and no record of payments on account.

One other error is still with us:

'Called - would look up to see whether [Personal] Drawings included in wages items and will get out past years' a/cs.' [2.15 Hale]

Even more familiar:

'Query? Record of takings and Bank Book etc? Response: No record of takings - all payments by cash. Bills not kept.' [2.16 Hale]

And another:

'24 Sept Asked for a/cs. 5 Oct - Reply; no material.  5 Oct - Wrote ?  No record of takings, bills etc'  [2.17 Hale]

Finally, another technical error:

'Enquiries re deductions.  Are repairs charged as well as depreciation & loan interest?  Acct called: Repairs & renewals charged in addition to depreciation.  Will look into question of depreciation for past years.' [2.37 Alt]

This last query lead to an increase from the declared amount of £2185 to £2324, including past years.

The Surveyors knew the sort of mistakes that were made, were prepared for them and were content to treat them as innocent errors, at least the first time round.

Things could be different the second time round.  One chemist ignored the Surveyor in 1908.  He declared £300 in his return and took no notice of three requests for accounts, in September & October 1908 and January 1909.  The assessment was made on £450 and the chemist did not appeal, presumably because he knew it wasn't big enough.  That was unwise, for the Surveyor returned to the question in 1909, secured a meeting and examined the ledgers and especially the bank book.  The result was an assessment of £600 with £15 Back Duty.

Peoples' financial affairs never cease to reveal odd customs. One oil merchant returned £285 and the Surveyor decided to investigate. His notes reveal that the taxpayer called in to explain and the entry reads:

'Cannot furnish proper accounts.  Profits very small.  Payment of accounts accepted in shares in cotton spinning mills.' [3.17 Alt]

This was plainly not good enough and one way or another the assessment was fixed at £400 and could not be reduced.

There is only one indication of what we would now call legal avoidance, though the implication is that the intention was really evasion.  It comes from Withington, but is worth mention.  The Surveyor noted:

One may wonder how the lady's investments fared when the War started three years later.

Many of us who have chuckled at the continued inclusion of the cost of keeping a horse in the Schedule E expenses rule, but it was a reality in 1908.  A grocer in Bowdon included as expenses

'keep of horse etc & stable rent, £1-5-0' [2/11 Bowd]

Chief rents are common in the Altrincham area.  In 1908 the Surveyor had to consider their creation, for a builder in Hale had omitted them from his records.  On the 6th October the Surveyor asked for or obtained accounts.  On the 12th he established that chief rents had been created but not included and on the same day (perhaps at a meeting) the builder accepted that he would pay Back Duty on them for the past.  On the 19th the Surveyor asked for a meeting which was held on 11th November.  There was then a rambling explanation:

'Surveyor asked as to accounts from commencement.  [Builder] said he had a [...] in 1900 & ceased business till 1902.  He was asked to get (1) particulars of chiefs omitted from April 1902 to March 1908 & cost of land (2) Value of houses built and unsold at April 1908 (3) ditto at April 1904.'

On the 19th November the builder called again, 

'with list of chiefs since 1902 - will send in full a/cs from April 1902 but will require some weeks to make out.'[2/24 Hale].

The assessment for the current year was eventually fixed at £716.

The Surveyor can be seen as understanding, if not tolerant, in the following:

'Inadequate returns due to ignorance - Bad Debts deducted not yet written off - Interest on Capital also deducted. Agreed to pay what had been underassessed 1905/6 to 1908/9.  Finally agreed to pay £175.' [3/11 Alt]

Sometimes one might wonder how a business managed to survive.  A jeweller explained that he had:

'16.10.09 No proper system of books but undertakes to keep cash book & furnish a/cs in future.  I agreed to postpone inquiry for further evidence.

'8.9.10 No return.  Addl Commissioners assessed £400' [3/17 Alt]

compared with the £370 returned the year before.

It may seem odd that a successful jeweller could manage his business without keeping any worthwhile records, but to judge by a range of entries, even a builder could do the same.  Their accounts usually seem to have been prepared on a cash basis, leaving the proprietor with no idea of his real worth, at least on paper.  One was mentioned above; he had provided some form of accounts, but they were not good enough and at a meeting on 20 January 1909 he agreed to provide more information.  The Surveyor's notes read:

'Called.  Will try to get value of contracts on hand in 1902, 3 & 4 & send a/c for period Jan 1905 to Ap 1905.' 

The details arrived on 3 February.  The Surveyor noted:

' Wrong? work in progress at end of year and whether payments on account of such had been included in a/cs.  The response - cannot give better accounts.  Says receipts for next year will contain any sums on account of work in progress & will equalise things.' [2.8 Alt]

When those came, there was no resolution, for the Surveyor noted:

'Couldn't give better a/cs - says receipts for next year will contain any sums on a/c of work in progress & will equalise things'.

Judged by the amount of pure accountancy error the following note on a confectioner is perhaps the worst example:

'Acct called.  Never took stock.  Practically constant - consists chiefly of perishable goods.  No drawings, Loan interest, Depreciation, Life Insurance & interest on capital charged.' [2/7 Alt]

The Surveyor did a quick calculation and decided that profits were about £428, against a Return of £321 but an assessment of £450.  That being so, he decided to leave matters as they were.

The entry for another casual taxpayer, a publican, from Ashton on Mersey is worth including even though he lay outside our area.  He declared £3200.  The Surveyor noted:

'Banks weekly but may pay out in cash before banking - Bank book contains some household expenses.' [2/10 Ashton]

There was again a quick calculation:

and a final optimistic note 'Will keep records in future'.

There are several striking feature about these entries.  The first is that the settlements are all very rough and ready, with no attempt at precision.  Generally the Surveyor tested the accuracy of the Returns by adding together annual savings and personal expenses to arrive at an approximate profit.  Everybody seems to have been quite happy with that and there was a general willingness to accept a broad brush solution.  There was a certain amount of horse trading, especially when there were no reliable figures to work on.  One Cotton Agent tried to wriggle:

Clearly the Inspector, to whom the Surveyor reported, was not satisfied with the original £15 offered and took a hand himself.

Another feature, clearly related to the last, is the speed with which settlements were reached.   Straight-forward Revenue investigations now take something over a year to settle, on average; complex ones can take years.  By contrast, in the period we are examining, more than one third were settled in less than a month (19 out of 51 where the dates can be established), and even more (26) in less than six.  Only 5 took from six months to a year and only one longer than that.  There was a special reason on that occasion, for settlement had to wait for a formal appeal hearing.  A fair number were settled on the day.  The Surveyor would invite the taxpayer to produce accounts or call.  Frequently he did so and talked through a settlement there and then.  It was not only rough justice, but quick for the Surveyors' replies to letters were usually sent by return.  There was a refreshing lack of bureaucracy in another way.  The only record that the Surveyor seems to have kept, other than his reports to the Inspector, were his notebook entries.  These never occupied more than one page and sometimes less than that, with two individuals to a page.  Perhaps in those easy days when the omitted profits were recovered at a shilling in the pound, or less, there was less point in fighting over every detail.

Tax rates were low, [iv] and by our standards the profits were minute.  Only a few incomes reached four figures and most were in the lower hundreds.  What was the effect of the Surveyors' activities?  It can be measured in two ways.  The first is the increase in assessment over the amount returned and the second is recovery for past years, Back Duty.  The first can be calculated by measuring the difference between the final assessment and the figure returned.  With a little uncertainty due to the way the figures were set out, that amounted to increased profits of £6873 for the current year examined.  Where there was Back Duty the Surveyors noted the fact but not always the amount.  Their entries amount to a minimum of tax of £693 for past years.  The total is comparatively much lower because tax rates were so low but it is clear that some of the profit discrepancies were substantial.

The 'Record of Unassessed Duty' records Back Duty settlements achieved between September 1910 and June 1928.  There is a cross reference between three individuals' entries in the 'Surveyors' Note Books' and the 'Unassessed Duty' book, but other cross references must be to books now lost.  The series of 'Unassessed Duty' books therefore served as a central point for a variety of individual Surveyors' 'Notebooks'.  The settlements achieved before the end of 1914 and relating to recoveries from the four parishes total £1382 tax.  If the three where there is a cross reference are deducted, the remainder total £1136.50 and that net figure can be added to the previous sum of the Surveyors' activities to arrive at the best value we can of their efforts.  It is necessarily an under-statement for it omits adjustments from 1911 to 1914 which were not passed to the record of 'Unassessed Duty' as well as Back Duty Settlements from 1908 to the end of 1910.  It is, however, the best we can do.  The enquiries relating to the remaining two entries that occur in both books were later investigations which in one case followed on from the first review, and in the other, reviewed a lengthy period covering and including the earlier year.

Finally, what of the men themselves?  Sadly, the records tell us nothing about the Surveyors as individuals other than the two names already cited and some of their successors who inherited and finally closed the notebooks.  One signature is clear, J. A. Hill, from 1920 but the others cannot be read with certainty.  They were accountable for their results, for in the 'Record of Unassessed Duty' there is a running total of their recoveries, though the reporting period is not clear.  We can guess a little about their working pattern, for they seem to have turned their attention to particular areas in rotation, starting a number of enquiries on the same day.  They left their offices and called upon taxpayers - such as the lady investing abroad - and also received visits in their office from accountants, solicitors and taxpayers.  Apart from that, they remain archetypically featureless.

This paper has been written under the constraints of Revenue confidentiality.  Personal tax records do not enter the public domain even after nearly 100 years and one result has to be a frustrating anonymity.  Descendents of some of the people named still live in the area; some of the businesses still flourish.  One senior holder of public office who forgot to declare the fees paid to him for that office could easily be identified and so cannot be named.  That limits the interest but even without that detail the story is still fresh.  Fiscal life was less formal than now as records were few and far between and computer printouts had not replaced the quick calculation on half a sheet of paper that everyone seemed to accept as fair.  'They tried to be fair' is perhaps the most fitting judgement on the Surveyors and Commissioners of the time.

APPENDIX 1

THE OCCUPATIONS EXAMINED IN THE SURVEYORS' NOTEBOOKS

(Excluding entries in the Record of Unassessed Duty which by definition arose from incorrect Returns)

*The figures were accepted the first year, shown to be incorrect the next.

APPENDIX 2

CASES REFERRED TO COMMISSIONERS

APPENDIX 3

THE DURATION OF ENQUIRIES