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Clause 30—(Meaning Of "Distribution" And Provision With Respect To Repaid Loans)

Volume 440: debated on Wednesday 16 July 1947

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I beg to move, in page 27, line 40, at end, to insert:

"(4) Where—
  • (a) as part of a scheme of amalgamation or reconstruction a trade or business carried on by a body corporate (in this Subsection referred to as 'the first company') is transferred to another body corporate (in this Subsection referred to as 'the second company');
  • (b) the consideration for the transfer consists wholly or mainly of shares in the second company; and
  • (c) the first and second companies jointly so elect by notice in writing given to the Commissioners within six months after the transfer or such longer time as the Commissioners may in any case allow,
  • the provisions of this Part of this Act shall apply subject to the following modifications, that is to say—
  • (i) any distribution of those shares to any person in a winding up of the first company shall, notwithstanding anything in Subsection (1) of this Section, not be deemed for the purposes of the last preceding Section to be a distribution to that person; and
  • (ii) in considering what distribution charge, if any falls to be made on the second company, any difference on which non-distribution relief for chargeable accounting periods before the transfer was given to the first company or other person assessable to profits tax on the profits of the trade or business of the first company shall, except so far as it has already operated to increase a distribution charge on the first company, be taken into account as if it had been a difference arising in relation to the second company on which non-distribution relief had been given to that company, and shall also be taken into account, in the case of the last chargeable accounting period of the second company, so as to increase the amount which, for the purposes of paragraph (c) of Subsection (1) of the last preceding Section, is to be treated as not a distribution of capital."
  • This rather formidable looking Amendment is designed to meet arguments advanced by hon. Gentlemen opposite to the effect that where we have—I think this point was made by the right hon. Member for the City of London (Mr. Assheton)—a bona fide amalgamation, distributions of shares for the purpose of that amalgamation shall not be treated as distributions for Profits Tax. The Amendment provides accordingly that the amalgamation must be a bona fide amalgamation. It must be part of a scheme for amalgamation for reconstruction carried out by a body corporate as a result of which the undertaking of the body corporate is transferred to another body corporate. It provides that a distribution of shares in liquidation resulting from such an amalgamation effected for the purpose of it, shall not rank as a distribution for the purpose of Profits Tax.

    I am very much obliged to the Chancellor of the Exchequer and to the hon. and learned Gentleman for this Amendment. It might easily have been the case that valuable amalgamations would not take place if this Amendment had not been made. This Amendment is of general interest, and it should be accepted by the House.

    Amendment agreed to.