HC Deb 29 February 1916 vol 80 cc880-2
62. Sir A. MARKHAM

asked the Chancellor of the Exchequer if he will say in the case of a company whose financial year ends on 31st December, but which notwithstanding makes out a half-yearly balance sheet on 30th June not signed by the auditors of the company, whether, for the purpose of the Excess Profits Tax, the accounts will be taken on the basis of two half-years ending 30th June instead of for the financial years of the company ending 31st December: whether he is aware that many companies have taken their financial year for Income Tax purposes as the basis for this tax and made their declaration under the Act accordingly; whether instructions have now been issued that this basis is not to be followed, but that where a company has made out half-yearly accounts for the purposes of the directors not signed by the auditors nor issued to the shareholders the two half-yearly accounts are still to be taken instead of the company's financial year; and will he say whether this will necessitate the reopening of the Income Tax assessments for three years, which in the case of collieries extend over five years, or whether assessments made for the purposes of Income Tax are not to be taken into account as a determining factor?


Under the provisions of Section 38 (2) of the Finance (No. 2) Act, 1915, the accounting period is taken as a half-year where that is the period for which the accounts of the trade or business have been made up, the question whether in a particular case they are so made up being one for determination on the facts. Many companies have rightly adopted their financial year as taken for Income Tax purposes, where that year coincides with the period for which accounts have been made up, and no instructions have been issued beyond those necessary to carry out these statutory principles. For the purposes of Excess Profits Duty the profits of the several periods of account fall to be separately determined, but this does not involve any reopening of Income Tax assessments.


What is the meaning of this answer of my right hon. Friend. I asked a specific question whether in the case of companies that made up their balance sheets for the financial year ended 31st December all accounts will be taken for the pre-war standard for the whole year or two half-years? The right hon. Gentleman has not answered that. Is he aware that there is an amount of chaos all over the country on this matter and that every commercial company has taken the year and not the two half-years?


I refer the hon. Baronet to the last part of my answer, in which I say: The accounting period is taken as a half-year, where that is the period for which the accounts of the trade or business have been made up.


Is the right hon. Gentleman aware that nearly all the companies and auditors have taken the financial year of the company and not the two half-years and made the accounts to the Treasury on that basis?


I am not aware of that.


Do I under stand my right hon. Friend to say that whether stock has been taken or not the accounting period will be taken as the half-year, because, as he knows, many companies and firms—


The hon. Member is arguing the question.