New Clause. — (Repeal of s. 36 of 8 and 9 Geo. V, c. 15.)

Part of Orders of the Day — Finance Bill. – in the House of Commons on 8th July 1924.

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Photo of Mr Thomas Keens Mr Thomas Keens , Aylesbury

There is one point in Section 21 of the Act of 1922 in which there is a refund of Corporations Profits Tax in respect of the amount that is charged for Super-tax, and it therefore follows that Section 21 is entirely disturbed, and it is necessary that the whole matter should be taken into consideration. In dealing with this matter it is desirable to have regard to the actual position as we find it. In the case of a company that has not distributed a reasonable part of its income, it is the practice to treat that limited company as though it were a partnership, and the assessment therefore made upon the company for Income Tax—which forms the basis of the assessment for Super-tax, which is levied upon the person in the name of the company, as mentioned in Section 21—is not the amount of the distributable profits, but the amount of statutory income, calculated according to the Income Tax Act. As the Corporation Profits Tax ceases to be levied for any accounting period after the 30th June, the whole balance of the, treatment under this Section is lost, and I suggest to the Financial Secretary that he should agree, if this Clause is withdrawn, that the parties interested should be called into consultation, so that a new Clause should be inserted which restores the balance under the Act of 1922. No one who has had experience in the working of this Section will agree that the decision of the Special Commissioners as to the way in which this operates is what was intended when the Finance Act, 1922, was passed. It, was clearly intended then that a reasonable amount should be distributed, and that the reasonable amount should be brought into charge, but now we have the view of the Special Commissioners, who have held that they have no discretion in the matter if they have the slightest difference as to what they find is a reasonable amount, and they have no alternative but to bring in the whole assessment and to make that liable for Super-tax. That was not intended by the Finance Act, 1922. What is a reasonable amount must always be a matter of opinion, as it frequently happens that this is a matter of keen controversy between the directors. It is especially unfair that on a decision of the Special Commissioners as to what is a reasonable amount, and that amount differs from the view of the directors, the whole amount must be brought into charge for Super-tax. It must be remembered that the Special Commissioners are adjudicating at a later date, when it may be experience has falsified the perfectly justifiable expectations of the directors. I appeal to the Financial Secretary to the Treasury to come to the arrangement suggested by the hon. Member for Farnham (Mr. A. M. Samuel), so that the parties interested may find what is the real position contemplated by the Act of 1922, affected by the position as we find it to-day.