Exemptions and Reliefs

Part of Clause 2 – in the House of Commons at 12:00 am on 3rd December 1968.

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Photo of Mr Michael Alison Mr Michael Alison , Barkston Ash 12:00 am, 3rd December 1968

Yes, where appropriate. He exudes a certain avuncular—indeed, paternal—regard for companies of all kinds. I now invite him to look at a problem which will face the small company, and the small close company in particular.

This difficulty will arise because of the problem, which I know the hon. Gentleman appreciates, of the small company getting its share of such bank credit as may be available after the invitation of his right hon. Friend the Chancellor of the Exchequer to the banks to restrict finances really begins to bite. He will know that small companies—and I have in mind the example of a small wine company, in which I have no interest at all to declare—will have to begin generating internal funds in anticipation of having to pay deposits.

If the small company is a small close company, the Financial Secretary will appreciate that its necessity to generate and retain within itself more funds for the possible payment of deposits will present it with an embarrassment, in that the notorious and extremely disagreeable Section 77 of the Finance Act, 1965, makes it necessary for small close companies—or, indeed, any close companies—to distribute a certain proportion of their income, the undistributed portion incurring Corporation Tax, Income Tax and Surtax.

I know that the hon. Gentleman can give no more than a general undertaking now, but may we take it that, when the next Finance Bill comes round, he will bear in mind the fact that something will have to be done for small companies which are, as a result of the Bill, forced to retain more money and so will not be able to distribute it because they have to save up for the necessity to meet import deposits? Perhaps he could give some assurance that an extra undistributed with that object in mind would not be treated in that way in terms of the Finance Act, 1965. I know that the Financial Secretary looks forward with eager anticipation to the Finance Bill, 1969, but I can say that with such an assurance a lot of close companies would regard the Bill with a great deal more equanimity.