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Clause 24—(Rate Of The Profits Tax)

Volume 440: debated on Wednesday 16 July 1947

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I beg to move, in page 22, line 7, at the end, to insert:

"(4) Where there falls to be included in the profits of a trade or business for any chargeable accounting period any interest payable under Subsection five or Section ten of the War Damage Act, 1943, the amount chargeable by way of the profits tax in respect of that period shall be reduced by an amount equal to seven and a half per cent. of the amount of that interest."
When this Clause was discussed in Committee, the Chancellor undertook to have another look at it. I have put down this Amendment in order to give him the opportunity of, I hope, agreeing with the arguments which were put forward then. I do not intend to go over the ground again. We are simply suggesting that the interest which would be received by an owner of property in respect of value payments should not be computed for the purpose of Profits Tax. This is income of a very exceptional kind, and if the Chancellor agrees with our view he will not be creating any sort of precedent. It will happen only this year, and not after that. I feel very strongly that the owners of property who, in many cases, have for some years been denied their normal income from that property because it was destroyed during the war, should not be called upon to pay a Profits Tax on an interest on those value payments. That seems to me most extraordinary and inequitable. The Chancellor said he would have another look at it, and I sincerely hope that he has done so, and is now prepared to accept this Amendment.

I beg to second the Amendment.

I wish only to remind the Financial Secretary of a point which I stressed in Committee, that this Profits Tax is a tax of a special character, discriminating against that portion of the profits which is distributed. The purpose of this is to encourage businesses to plough back their profits rather than distribute them to the shareholders. That may be reasonable over the broader aspect, but I submit that this income is of a very special character and companies should be at liberty to distribute it to the shareholders without any special penalty being imposed upon that distribution. Therefore, in my submission, the increased element of the Profits Tax in respect of the distributed portion of the profits ought not to be applicable at all to this source of income, and I hope that the Financial Secretary will be able to give us a satisfactory answer

I am very sorry to have to disappoint the hon. Member for Hornsey (Mr. Gammans) and the hon. Member for Sutton Coldfield (Sir J. Mellor). It is true that the hon. Member for Hornsey raised this point during the Committee stage and my right hon. Friend has since very carefully considered what was said. On reflection, however, he must adhere to the principle in general that one cannot differentiate as between sources of income. Franked investment income is different because the Profits Tax is already paid, but this is income like general income, and there is not sufficient reason, as far as we can see, for excluding it from the category of general income and putting it in a privileged position.

It has, of course, notionally accumulated during the war years. In point of fact, it is being treated as income in the year of receipt, and, therefore, it will fall to be charged at the 9s. rate of Income Tax, whereas it accumulated notionally during the period when the rate of Income Tax was 10s. in the £. The taxpayer has already got a measure of advantage in that respect, but, broadly speaking, the fact that it is liable to Profits Tax will compensate for the additional advantage he has got in having it treated now as income on which is payable the present rate of Income Tax rather than that rate which prevailed during the years when it notionally accumulated. Apart from that, the major objection which we feel is that no case is made out for differentiation between this type of income and other types of income, and if one accepts the principle that one should give a privilege to this particular sort of income, then it is difficult not to go on and work out infinite differentiations between many other different types.

That is a most disappointing reply. The Solicitor-General says that the Government cannot differentiate between one income and another. I should have thought that this was a very special and peculiar type of income. It is not everybody who has his house value destroyed or gets a value payment and has the interest on the sum which has accumulated paid in one year. In those respects, it is entirely different from any other income, and to grant the concession asked for here would not open the door to any kind of precedent unless

Division No. 312.]


[7.27 p.m.

Amory, D. HeathcoalCrosthwaite-Eyre, Col. O. E.Hannon, Sir P. (Moseley)
Assheton, Rt. Hon. RCuthbert. W. N.Harvey, Air-Comdre. A. V.
Astor, Hon. MDavies, Clement (Montgomery)Hurd, A.
Baldwin, A. EDigby, S. W.Hutchison, Col. J. R. (Glasgow, C.)
Bennett, Sir P.Dodds-Parker, A. DJarvis, Sir J
Birch, NigelDrayson, G. BJennings, R.
Bossom, A. CDrewe, C.Lancaster, Col. C. G.
Bower, N.Dugdale, Maj. Sir T. (Richmond)Langford-Holt, J.
Boyd-Carpenter, J. A.Eden, Rt. Hon A.Law, Rt. Hon. R. K.
Bracken, Rt. Hon. BrendanFletcher, W. (Bury)Linstead, H N.
Buchan-Hepburn, P G. TGage, C.Lipson, D. L.
Byers, FrankGammans, L. D.Lloyd, Selwyn (Wirral)
Clarke, Col R. S.George, Lady M. Lloyd (Anglesey)Low, Brig. A. R. W.
Cooper-Key, E. M.Grant, LadyLucas-Tooth, Sir H.
Corbett, Lieut.-Col. U. (Ludlow)Gridley, Sir A.Lyttelton, Rt. Hon. O.
Crookshank, Capt. Rt. Hon H. F CGruffydd, Prof. W. J.Macdonald, Sir P. (I of Wight)

there is going to be another war, another series of value payments, and another occasion during which the interest will accumulate over a number of years. The Solicitor-General has been most unfortunate in the arguments which he has been provided with or which he has sought for himself in this matter, and I hope that even now he will consult with the Chancellor of the Exchequer or the Financial Secretary to the Treasury and see whether this concession cannot be granted.

The amount of money involved cannot be very great, and no precedent can be established except on the assumption that there will be another war. There is no similarity to any other kind of income whatsoever. To say that by good fortune these people are going to receive this income when the rate of Income Tax is 9s. in the £ instead of 10s. in the £ which is the rate of Income Tax they would have paid had they received it at an earlier period, is really no kind of consolation and is not very good sense. It was always foreseen that at the time when these value payments would be paid Income Tax would be at a rate lower than during the war and, therefore, to say that some advantage is accruing to these unfortunate people seems a very poor argument. Will the Financial Secretary tell us what the estimate for this concession will be? If we find, contrary to my expectations, that it is a very large sum indeed then possibly my hon. Friends would think they were not arguing a very good case. I do not believe that that can be so. I hope, therefore, that before the Financial Secretary entirely closes the door he will tell us what the financial cost would be if this Amendment were carried.

Question put, "That those words be there inserted in the Bill."

The House divided: Ayes, 88; Noes, 260.

Macpherson, N. (Dumfries)Rayner, Brig. RVane, W. M F.
Marlowe, A. A. H.Reed, Sir S. (Aylesbury)Wadsworlh, G.
Marshall, D. (Bodmin)Roberts, H. (Handsworth)Walker-Smith, D.
Mellor, Sir JRoberts, W. (Cumberland, N.)Ward, Hon. G. R
Molson, A. H. E.Robinson, Wing-Comdr. RolandWheatley, Colonel M. J.
Morris, Hopkin (Carmarthen)Ropner Col LWhite, Sir D. (Fareham)
Nutting, AnthonySanderson, Sir F.White, J. B. (Canterbury)
O'Neill, Rt. Hon. Sir HSmith, E. P. (Ashford)Williams, Gerald (Tonbridge)
Orr-Ewing, I. L.Spearman, A. C M.Winterton Rt. Hon. Earl
Osborne, C.Stanley, Rt Hon. OYork, C
Peake, Rt. Hon. O.Studholme, H G
Peto, Brig. C. H. MSutcliffe, HTELLERS FOR THE AYES:
Pitman, I. J.Teeling, WilliamMajor Conant and
Ponsonby, Col. C. EThorneycroft, G. E. P. (Monmouth)Lieut.-Colonel Thorp.
Ramsay, Maj. STurton, R. H.


Adams, Richard (Balham)Donovan, T.Leonard, W.
Adams, W. T. (Hammersmith, South)Durbin, E. F. MLeslie, J. R.
Allen, A. C. (Bosworth)Ede, Rt. Hon. J. C.Levy, B. W.
Allen, Scholefield (Crewe)Edwards, Rt. Hon. Sir C. (Bedwellty)Lewis, A. W. J. (Upton)
Anderson, A. (Motherwell)Edwards, John (Blackburn)Lindgren, G. S
Attewell, H. CEdwards, W. J. (Whitechapel)Logan, D. G.
Austin, H. LewisEvans, E. (Lowestoft)Longden, F
Awbery, S. S.Evans, S. N. (Wednesbury)Lyne, A. W
Ayles, W. H.Ewart, R.McAdam, W.
Ayrton Gould, Mrs. BFairhurst, FMcEntee, V. La T.
Baird, JFarthing, W. J.McGhee, H. G.
Balfour, A.Field, Capt. W JMackay, R. W. G (Hull, N. W.)
Barstow, P. G.Follick, MMcKinlay, A. S.
Barton, C.Forman, J. CMaclean, N. (Govan)
Battley, J. R.Foster, W. (Wigan)McLeavy, F
Bechervaise, A. E.Fraser, T (Hamilton)Mallalieu, J. P. W.
Belcher, J. W.Ganley, Mrs C SManning, Mrs. L. (Epping)
Bellenger, Rt. Hon. F. J.Gibbins, J.Marquand, H. A
Benson, G.Gibson, C WMarshall, F. (Brightside)
Bevan, Rt. Hon. A. (Ebbw Vale)Glanville, J. E. (Consett)Medland, H M
Bing, G. H. CGordon-Walker, P. C.Middleton, Mrs. L
Blenkinsop, AGreenwood, A. W J. (Heywood)Mikardo, Ian
Blyton, W. R.Grenfell, D RMillington, Wing-Comdr. E. R.
Bowden, Flg.-Offr. H. WGrey, C. FMonslow, W
Bowles, F. G. (Nuneaton)Grierson, EMoody, A. S.
Braddock, Mrs. E. M (L'p, Exch'ge)Griffiths, D. (Rother Valley)Morgan, Dr. H. B.
Braddock, T. (Mitcham)Griffiths, Rt. Hon. J. (Llanelly)Morley, R.
Brook, D. (Halifax)Griffiths, W. D (Moss Side)Morris, P. (Swansea, W.)
Brooks, T. J. (Rothwell)Gunter, R. JMort, D. L
Brown, George (Belper)Haire, John E (Wycombe)Moyle, A.
Brown, T J. (Ince)Hale, LeslieNally, W.
Bruce, Maj D. W THall, W. G.Naylor, T. E.
Buchanan, G.Hamilton, Lieut.-Col R.Neal, H. (Claycross)
Burden, T. WHannan, W (Maryhill)Nichol, Mrs. M. E. (Bradford, N.)
Burke, W. A.Harrison, JNicholls. H. R. (Stratford)
Butler, H. W. (Hackney, S.)Hastings, Dr SomervilleNoel-Baker, Capt. F. E. (Brentford)
Callaghan, JamesHenderson, A. (Kingswinford)Noel-Baker, Rt. Hon. P. J. (Derby)
Carmichael, JamesHenderson, Joseph (Ardwick)O'Brien, T.
Chamberlain, R. A.Herbison, Miss M.Orbach, M.
Champion, A. J.Hicks, G.Paling, Rt. Hon. Wilfred (Wentworth)
Chater, D.Hobson, C. R.Palmer, A. M. F.
Chetwynd, G. R.Holman, PPargiter, G. A.
Cluse, W. S.Holmes, H. E. (Hemsworth)Parker, J.
Cocks, F. S.House, GParkin, B. T.
Collick, P.Hoy, J.Paton, J. (Norwich)
Collins, V. J.Hudson, J. H. (Ealing, W.)Peart, T. F
Colman, Miss G. M.Hughes, H. D. (Wolverhampton, W.)Poole, Major Cecil (Lichfield)
Hutchinson, H. L. (Rusholme)
Comyns, Dr. L.Hynd, J. B. (Attercliffe)Popplewell, E.
Cooper, Wing-Comdr. G.Irving, W. JPorter E. (Warrington)
Corbet, Mrs. F. K. (Camb well N W.)Janner, BPorter, G. (Leeds)
Corvedale, ViscountJay, D. P. TPrice, M. Philip*
Cove, W. GJeger, G. (Winchester)Proctor, W. T.
Crawley, AJeger, Dr. S W (St. Pancras, S. E.)Pryde, D. J.
Daggar, G.John, WRandall, H. E.
Daines, P.Jones, Rt. Hon. A. C. (Shipley)Ranger, J
Dalton, Rt. Hon. H.Jones, D. T. (Hartlepools)Rankin, J.
Davies, Edward (Burslem)Jones, J. H. (Bolton)Reeves, J.
Davies, Ernest (Enfield)Keenan, W.Reid, T. (Swindon)
Davies, Harold (Leek)Kenyon, C.Richards, R.
Davies, Hadyn (St. Pancras, S. W.)Kinghorn, Sqn.-Ldr ERidealgh, Mrs. M.
Davies, R. J. (Westhoughton)Kirby, B. VRobertson, J. J. (Berwick)
Deer, G.Kirkwood, DRogers, G. H. R.
Delargy, H. JLavers, S.Ross, William (Kilmarnock)
Diamond, J.Lawson, Rt Hon. J. J.Royle, C.
Dobbie, WLee, F. (Hulme)Sargood, R
Dodds, N. N.Lee, Miss J (Cannock)Scollan, T.

Segal, Dr. SStubbs, A. EWatson, W. M
Shackleton, E. A ASylvester, G OWebb, M. (Bradford, C.)
Sharp, GranvilleSymonds, A. L.Wells, P. L. (Faversham)
Shawcross, C N. (Widnes)Taylor, H. B. (Mansfield)West, D. G.
Silverman, J. (Erdington)Taylor, R. J. (Morpeth)Whiteley, Rt. Hon. W
Silverman, S. S. (Nelson)Taylor, Dr. S. (Barnet)Wilkes, L.
Skeffington-Lodge, T. CThomas, D. E. (Aberdare)Wilkins, W. A.
Skinnard, F W.Thomas, I. O. (Wrekin)Williams, D. J. (Neath)
Smith, C. (Colchester)Thorneycroft, Harry (Clayton)Williams, J. L. (Kelvingrove)
Smith, H. N. (Nottingham, S.)Thurtle, ErnestWilliams, Rt. Hon. T. (Don Valley)
Smith, S. H. (Hull, S. W.)Tiffany, S.Williams, W. R. (Heston)
Snow, Capt. J. W.Timmons, J.Willis, E.
Sorensen, R. W.Titterington, M. FWills, Mrs. E A
Soskice, Maj Sir FTolley, L.Woodburn, A.
Sparks, J. A.Tomlinson, Rt. Hon. GWoods, G. S
Stamford, WTurner-Samuels, MWyatt, W.
Steele, T.Viant, S. PYates, V. F.
Stewart, Michael (Fulham, E.)Walkden, E.Young, Sir R. (Newton)
Strachey, JWalker, G. H.Zilliacus, K.
Strauss, G. R (Lambeth, N)Wallace, G. D. (Chislehurst)
Stross, Dr. BWatkins, T. ETELLERS FOR THE NOES
Mr. Pearson and Mr. Simmons