asked the Chancellor of the Exchequer if, when dividends are distributed free of tax by companies, the money set aside to pay the tax is treated as a cost of production, or is taken as part of the distributed profits and taxed accordingly, or accepted as undistributed profit and receives the lower rate of tax.

A dividend paid by a company out of profits that have borne Income Tax which is expressed to be "free of tax" represents, for tax purposes, a distribution equal to the net dividend plus the Income Tax appropriate to it, and the gross amount is chargeable to Profits Tax at the higher (distributed) rate.