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New Clause—(Amendment Of Section 38 (3) Of 5 & 6Geo V, C 89)

Volume 155: debated on Wednesday 28 June 1922

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  • (1) Where a part only of the interest in any trade or business of any person, being the proprietor thereof or a partner therein, passes by any means to some other person or corporation, then one-half of the remaining part of such interest shall for the purpose of Sub-section (3) of Section thirty-eight of the principal Act (which allows a repayment of or set off against Excess Profits Duty in case of deficiency or loss) be treated as if it were the original interest of such first-named person.
  • (2) Where the interest or any part of the interest in any trade or business of any person, being the proprietor thereof or a partner therein, passes by any disposition to a company registered under the Companies Acts, 1908 to 1917, but the person retains the beneficial interest in the whole or in any part of his original interest by reason of being the owner of capital of such company, then, for the purpose of Sub-section (3) of Section thirty-eight of the principal Act one-half of the whole or of such part of his interest, as the case may be, shall be deemed not to have passed from such person.
  • (3) Any repayment of or set-off against Excess Profits Duty to which any person may be entitled under this Section shall not be payable immediately but shall be payable by five equal annual instalments.—[Mr. Dennis Herbert.]
  • Brought up, and read the First time.

    I beg to move, "That the Clause be read a Second time."

    The Clause was put down as a result of a promise which the Chancellor of the Exchequer was good enough to give me when discussing Clause 26 of the Bill. Clause 26 refers to what is described here as a Section of the principal Act, and under which any person or firm who has paid Excess Profits Duty and afterwards makes a big loss can obtain a repayment from the Government in respect of that loss. It has been held that that right to recover does not apply to the business but only to the actual person or firm engaged, and, therefore, if the business changes hands the right is lost. Clause 26 of the Bill dealt with the case where the business changed hands, as between father and son, or husband and wife, or wife and husband, and it was agreed that that should not be taken as a change of proprietorship. It was then asked that that right should not be lost by reason of the fact that a man or a firm parted with a part of their business, but not with the whole of it, and that it should not be lost if a man or a firm technically parted with the business by means of the reconstruction of a company or by the transfer of the business to a company in which the same persons held the interest by holding it in the form of shares. The Chancellor o the Exchequer was sympathetic with the proposal that these two cases should be let in, but I think the principal objection was that it would cost too much, and the second one was that it would not be easy to draw a line which would clearly define the persons who should be brought into this particular form of relief. I have ventured to put down this Clause with a view to bringing back into the right to obtain this repayment two classes and two classes only, namely, the man who has parted with a portion of his business, and, secondly, the man who has not really parted with his business at all, but takes it in the form of shares in a limited company instead of in the original form. In order to get over the Chancellor's objection that the concession would cost too much I ask that they may have not the whole of what they would be entitled to if there was no change, but that they may have 50 per cent. of it, and have it. spread over a period of five years.

    The hon. Member's point is that in a case of deficiency on which a claim could have been made for a return of Excess Profits Duty, and where that right has lapsed because of something done, the party should be able to get back one-half of the duty. That seems to be a case in which the Clause would impose a charge.

    I do not think that can possibly be so. This is a case of getting a repayment out of profits which have been paid in the form of Excess Profits Duty, and a very slight repayment, because I am only asking for 50 per cent., and to have that spread over five years. What I am asking the Chancellor to give this year is only one-tenth of what it would cost him if he brought in these people in the ordinary way. With regard to future years, I suggest that the number of firms which will probably be saved from going out of business altogether by having this addition to their credit in these difficult times will probably so help trade and so increase the amount assessable to Income Tax in the next four years that the small charge that there will be in the coming four years will probably be fully met by the improvement in the condition of these firms by reason of this slight concession. No doubt by this time the Chancellor can say how much it would cost. If this concession would still cost too much r and the many other Members who feel very strongly on the question of these struggling firms, will be very grateful for anything which the Chancellor can give us on these lines.

    4.0 A.M.

    On a point of Order. I submit that the Clause does transgress the rule, because it might clearly put on an increased charge. Imagine anyone who pays Excess Profits Duty to the extent of £3,000 and who parts with half of the business to somebody else. As the law stands at present he can set off £3,000 against the £3,000 he has paid. Under the Clause he can only set off £1,500 of that £3,000.

    He is not now entitled to recover the £3,000. Because he cannot recover that sum I am asking that he be allowed to recover the £1,500.

    In view of the uncertainty on the subject, and the delay in elucidating it, I am bound to put the Clause.

    I accept on the part of the Government your blame for not having elucidated the Clause before now, but to be perfectly frank we find the Clause a difficult one to elucidate—[HON. MEMBERS: "Why?"]—and I would venture to suggest to the hon. Member who moved it that he ask leave to withdraw the Clause so that it can be discussed between now and the Report stage, when it would be given careful consideration to see whether it is one that is required by the present state of the law. If it would be fair to introduce an Amendment on the lines of the hon. Member's speech, we would give it consideration between now and the Report stage. I respectfully make an appeal to my Friend to withdraw the Clause.

    In view of the hour and of the definite assurance of the Solicitor-General, I beg to ask leave to withdraw the Motion.

    Motion and Clause, by leave, withdrawn.