If any person shall prove to the satisfaction of the Commissioners that debts taken as good in his final accounting period proved to be bad in whole or in part within six months from the end of that period and which had not already been allowed for, or were insufficiently allowed for in the accounts of his final accounting period, his profits or losses in the final accounting period shall be adjusted accordingly.—[Mr. Hannan.]
Brought up, and read the First time.
I beg to move, "That the Clause be read a Second time."The Clause asks for an allowance in the case of bad debts. This question has assumed very serious consequences for a large number of firms. At the end of the last accounting period they took various debts as good. Later it proved impossible to collect those sums of money which were outstanding, and the result has been that they have become liable for Excess Profits Duty on profits they never, in fact, secured at all. My Clause asks that six months' grace be given and that any debts of that kind within that period after the end of the accounting period shall be allowed for. The Clause is so drafted that any debt already allowed for is not to be allowed for again. The time limit of six months ensures that debts must have become irrecoverable at any date in the past and so rules out the possibility of fraud. I submit that this is a very modest proposal, and it is of great interest and moment to a large number of firms. Really it does not go so far as to give them the fullest possible measure of justice to which they are entitled. This question was fully discussed on tile Finance Bill last year, and I hope my right hon. Friend, realising the great struggle through which a large number of firms are passing and the great sacrifices which have to be made in order to recover their position and maintain any sort of figure in our industrial life, will give the matter full and fair consideration.
As my hon. Friend knows, by the arrangement I made in the Finance Bill last year I gave the greatest possible consideration to the plight in which the industry found itself. I met the traders of the country in every possible way. There was scarcely a suggestion which they made which I did not in some measure apply my mind to. Amongst other things, I extended the accounting period, the period in which they might calculate stock for the purpose of writing down and allowed them to put the losses they had suffered against previous amounts of Excess Profits Duty paid. My hon. Friend's new Clause now seeks to extend still further the accounting period so far as bad debts are concerned. Quite frankly I am not in a position to extend the period further. I have no doubt there are cases in which calculations have proved to be not entirely accurate or entirely justified, but, on the other hand, I am sure that many debts may have been written off as bad debts which, in fact, have proved to he good. We arranged the matter in the last Finance Bill. I have no doubt that in some cases traders suffered and in other cases the Exchequer, but I do not think I can extend the point for the purpose of granting this relief now.
I wish to support my hon. Friend in asking acceptance of this Clause. The merchanting class of the West Riding of Yorkshire have suffered very severely indeed. Perhaps I may best put the point to the Committee by giving two concrete cases. In the case of one firm, which I will call A.B., the final accounting period was 30th November, 1920. This firm had a large number of accounts, both home and foreign accounts, which at that date were not paid. These accounts amounted to something like £8,516. At that time the merchants in the home trade were seemingly sound. The collapse that took place, look place after that date. The trading community generally did not believe that so many of the home trade merchants or of the foreign trade merchants would not be able to meet their liabilities. The débácle that came over the woollen and worsted trades was not expected, and when it did come the repudiation of contracts was greater than ever has been known in the history of the trade. This was not suspected in November, 1920, when this particular firm took stock. It did not make any reserve for possible bad debts on this £9,000. A short time after 30th November, when the stock was taken, and after the accounts had been audited, one of the principal customers of this firm had to call his creditors together. But because the accounting period of this firm ended on 30th November, 1020, they could get no allowance, and got no allowance to reclaim under the Excess Profits Duty, although the taxing authority took 60 per cent. out of the profits that they had made up to 30th November—that they were supposed to have made out of this particular firm who never paid the debt. There was another firm I will call C.D. Their accounting period ended on 31st March, 1921 they also did business with this particular firm. But before 31st March, 1921, this firm failed, and so they, C.D., did not pay the 60 per cent. on the profits that they had made. In the one case they, C.D., get out of the 60 per cent., and in the other the taxing authorities insisted upon the firm A.B. paying the 60 per cent. I put it to the Chancellor of the Exchequer, is it just in the one case to exact 60 per cent., and in the other case not to exact it? If the Chancellor of the Exchequer would put the period at which these duties shall be reclaimed, the same period that he agreed for the taking of stock, that is, 31st August, 1921, it would be a very fair proposition to make and would help trade very much. This proposition is not put forward in the interests of firms that have done well, and are doing well. It is put forward in the interests of firms that have suffered more than any other class of firms in the country. Unless we have these merchanting firms to go to to sell our goods throughout the world we are going to have very great difficulty in getting trade going, which we all wish to see. I do very earnestly press on the Chancellor of the Exchequer to agree that the period to which these had debts shall be reclaimed shall be 31st August, 1921, instead of the higgledy-piggledy system that has prevailed up to the present time.
Question, "That the Clause be read a Second time," put, and negatived.