I beg to move, "That the Clause be read a Second time."
This is merely a drafting Amendment of the Act as it now stands. We wish to insert the words "reasonable part of such." We propose this new Clause in order to bring the first part of the first
Sub-section of Section 21 of the Act of 1922 into complete harmony with the concluding words of the same Sub-section. We are trying to make the first part of the first part of the Sub-section harmonise with the words of the last part of the Sub-section, which read:
Provided that in determining whether any company has or has not distributed a reasonable part of its income as aforesaid the Commissioners shall have regard not only to the current requirements of the company's business, but also to such other requirements as may be necessary or advisable for the maintenance and development of that business.
Under Section 21 of the Act of 1922 the Company to which this Section applies must distribute a, reasonable part of its
profits so that the recipients will include that proportionate amount in their Super-tax returns. If the company does not distribute a reasonable part of its profits the Commissioners may direct that, for the purposes of assessment of its members for Super-tax, the said income of the company from all sources shall for the year or other period be deemed to be the income of the members. What is the "said" income? Why not "reasonable part"? I took a considerable part in getting this Clause substituted and put into the Act of 1922, and after remarks I made in the Debate upon the original Clause the late Chancellor of the Exchequer got up and said he would withdraw his original Clause. We had a consultation with him behind the Chair, and he then undertook to draw up this present Clause which we now seek to amend. We had no idea when we agreed to the Clause that it would be interpreted in the way it has been. We had no idea of the ambiguities that would arise out of it. May I give an instance to illustrate what I mean? If a company has made £20,000 in the year and it has decided to distribute £12,000 to its members and to hold back £8,000 for the development of the company, that may be thought to be a reasonable amount to hold back, and the Commissioners may consider it reasonable and accept £12,000 for Super-tax purposes; but if, by chance, the company has distributed only £11,000 and has reserved £9,000 the Commissioners may come along and say, "You have not distributed a reasonable amount," and then they have power under this Act to fix the assessment, not at the admittedly reasonable£12,000, but at£20,000, the whole amount of the profits for the year; and not the reasonable part of the profits. That is, I submit, a great hardship for the company, and it really defeats the intention of the Act, which provides for regard to be had for the maintenance and development of the concern. I suggest we ought to give the Commissioners discretion, and we can do that by importing into the Clause the words "reasonable part of the income," thereby making the earlier part of the Clause harmonise with the closing words of the Sub-section. For that reason, I beg to move that this new Clause be read a second time.