Destroyed Trading Stock (Excess Profits Tax).

Oral Answers to Questions — National Finance. – in the House of Commons on 19th May 1942.

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Photo of Sir William Davison Sir William Davison , Kensington South

asked the Chancellor of the Exchequer whether he is aware that the Inland Revenue are treating payments by the War Damage Commission in respect of trading stock destroyed by enemy action as a constructive sale, the profits of which are liable to Excess Profits Tax, notwithstanding the fact that the whole of such payment is required for replacement of the stock destroyed; and whether he will consider amending the law necessary to enable the trader to retain the full amount of his insurance for the replacement of his stock?

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

I assume that my hon. Friend is referring to sums recovered by traders from insurance of trading stock effected under Part II of the War Risks Insurance Act, 1939. For taxation purposes, premiums paid to effect such insurances are, in the ordinary course, allowed as deductions in computing profits, and sums recovered by traders in respect of such insurances constitute trading receipts. I may point out that the same treatment is applied to premiums paid and sums recovered under fire insurance policies in respect of trading stock. I can see no ground for amending the law in these circumstances.

Photo of Sir William Davison Sir William Davison , Kensington South

Is the Minister aware that by treating total loss of the stock destroyed by enemy action as a constructive sale liable to Excess Profits Tax, he is placing the trader, in many cases, in a worse position than if the goods had not been insured at all?

Photo of Sir Kingsley Wood Sir Kingsley Wood , Woolwich West

I shall be glad if my hon. Friend will send me particulars of any case he has in mind.