§ (1) The Finance (No. 2) Act, 1915 (in this Part of this Act referred to as the principal Act), shall, so far as it relates to Excess Profits Duty, apply, until Parliament otherwise determines, to any accounting period ending on or after the first day of July, nineteen hundred and fifteen, as it applies to accounting periods ended after the fourth day of August, nineteen hundred and fourteen, and before the said first day of July.
§ (2) Section thirty-eight of the principal Act shall, as respects excess profits arising in any accounting period beginning after the expiration of a year from the commencement of the first accounting period, have effect as if sixty per cent, of the excess were substituted as the rate of duty for fifty per cent. of the excess.
§ Where part of an accounting period is after and part before the date of the expiration of a year from the commencement of the first accounting period, the total excess profits and deficiencies or 491 losses arising in. the accounting period shall be apportioned between the time up to and including, and the time after, that date in proportion to the length of those times respectively, and the rate attributable to the time after and the time before and including that date shall respectively be sixty and fifty per cent. of the excess.
§ In the case of trades or businesses commencing after the fourth day of August, ninteen hundred and fourteen, the rate of duty shall be sixty per cent. of the excess in respect of any accounting period ending after the fourth day of August, nineteen hundred and fifteen.
§ In calculating any repayment or set off under Subsection (3) of Section thirty-eight of the principal Act any amount to be repaid or set off on account of a deficiency or loss arising in any period in respect of which duty would be payable at the rate of fifty per cent. of the excess, shall be calculated by reference to that rate of duty.
§ Any additional duty payable by virtue of this Section in respect of a past accounting period may be assessed and recovered notwithstanding that duty has already been assessed in respect of that period.
§ (3) It shall be the duty of every person chargeable to Excess Profits Duty under Part III. of the principal Act as extended by this Act, if he has not previously given notice of his liability to be charged with Excess Profits Duty in respect of any accounting period, to give notice to the Commissioners of Inland Revenue before the expiration of two months after the termination of any accounting period in respect of which he is chargeable, or if the accounting period terminated before the passing of this Act, within one month after the passing of this Act,
§ If any person fails to give the notice required by this provision he shall be liable on summary conviction to a fine not exceeding one hundred pounds, and to a further fine not exceeding ten pounds a day for every day during which the offence continues after conviction therefor.
§ Amendments made:
§ In Sub-section (1), leave out the word "until" ["until Parliament otherwise determines"], and insert instead thereof the word "unless."
§ Sir J. D. REES
I beg to move, in Subsection (2), to leave out the words "In calculating any repayment or setoff under Subsection (3) of Section thirty-eight of the principal Act any amount to be repaid or set off on account of a deficiency or loss arising in any period in respect of which duty would be payable at the rate of 50 per cent, of the excess, shall be calculated by reference to that rate of duty."
Under the principal Act it is provided that the Excess Profits Duty is only paid on the net excess over the whole period, but since the rate has been raised from 50 to 60 per cent, the lines which I propose to leave out have been added. It was considered before, and no doubt it was the case that the deficiency of the first accounting period was to be deducted from the excess of the second accounting period, and that the duty should be paid on the remaining amount. By the words which I propose to leave out an alteration is introduced in the method of accounting laid down by the principal Act. In these words, as I understand them—and I believe it to be the correct interpretation—60 per cent. is taken of the profit of the second accounting period, and all that is allowed is a deduction from the sum so arrived at of 50 per cent. of the deficiency of the first accounting period. I will put it into figures. Suppose a concern has a deficiency in the first accounting period of £50,000, and in the second accounting period there is an excess of £50,000. Under the principal Act the excess of £50,000 would be set off against the deficiency of £50,000, and there would be nothing to pay under the head of excess profits. If the words which I now propose should be left out stand part of the Clause, what will happen, apparently, will be this, that the concern would have to pay 60 per cent. on the £50,000 excess, which amounts to £30,000, and would only get a setoff of 50 per cent. on the other £50,000, or £25,000. In the two periods one £50,000 is set off against the other £50,000, so that there is no sum upon which excess profit could be taken by the Government; but under the new method of calculation it becomes a case of £30,000 against a setoff of £25,000, and £5,000 has to be paid as excess profits to the Government This is an actual case of there being an excess of £50,000 in one 493 period and a deficiency of £50,000 in another. I hope I have made it quite clear by the figures I have quoted that the present method of calculation is not fair, and I put it to the Chancellor of the Exchequer that it is not what was intended. This is a case which has actually happened and which may happen, and no doubt does happen in regard to a large number of concerns. I do urge that the words I propose to leave out should be omitted, but if that does not find favour with the right hon. Gentleman that some other method should be adopted to prevent the exaction of Excess Profits Duty to the amount of £5,000 where there actually is no excess profit, because the period of deficiency exactly equalises the period of excess.
§ Sir J. HARMOOD-BANNER
I beg to second the Amendment. I put this question to the Chancellor of the Exchequer when we were in Committee and he promised to look into it. It is rather intricate. As it stands at present it looks as if, under the new method, there is penalising to the extent of £5,000. I do not think that it is intended to come out in that way. I have received a good many representations from various people asking what is the meaning of it. They do not understand it no more than I do myself.
Mr. McKINNON WOOD
This is only a particular case of the general principle that you have to pay taxation on the amount which is fixed by Parliament for the year. A similar case to that put by the hon. Member could be mentioned. Take the case of two men, one of whom earns a certain income in the year when the Income Tax is 2s. 6d., and the other earns the same income the next year when the Income Tax is 5s. The first man pays nothing in the second year and the second man pays nothing in the first. You have got an exactly parallel case. It is only an illustration of the principle on which you go that a man has to take his chance and to pay his tax on the year in which his income is earned.
§ Amendment negatived.