§ Where it is shown to the satisfaction of the Commissioners of Inland Revenue that on a fair and reasonable valuation of the assets of a company or firm the payment of any Excess Profits Duty would render the company or firm insolvent, 423 only such part of the duty shall be exigible as will leave the company or firm solvent.—[Mr. J. M. Henderson.]
§ Clause brought up, and read a first time.
Mr. HENDERSONI beg to move, " That the Clause be read a second time."
This deals with the case I was mentioning when I was very properly ruled out of order. It is that of a firm which became insolvent through bad manage in 1912. In that year the creditors allowed it to go on, and with improved management the position also improved. They did not make money in 1913, but did not lose any. In 1914 the position got better, and in 1915 they made so much profit, but still a profit which, under the Excess Profits Duty and on the percentage basis, will show a sum due to the Exchequer in respect of excess profits. The capital of the company was only £l,000, but the debts of the company on which it was trading amounted to £15,000. In that case there would be no prewar standard, and the computation of 6 per cent. on £1,000 in £60, while the payment which would have to be made under the Excess Profits Tax would be something like £3,000. Such a payment would be impossible to that firm without making it again insolvent. This Clause is intended to meet cases of that kind. I am rather encouraged to press this Clause, having regard to the concession my right hon. Friend made by his first Amendment, which I do not think will cover this case. I should like to have some assurance that the Treasury will not exact Excess Profits Duty where the creditors will not be met, and where there is not sufficient money after paying the duty to meet the ordinary claims of creditors or debenture holders, as the case may be, of the company. I would ask him to consider the point and see if he cannot make the concession that where the payment of the Excess Profits Duty would make a company insolvent I hope he will say that he will not exact it, or will only exact so much of it as will not leave the company still insolvent.
§ Sir A. MONDI beg to second the Motion.
§ Mr. CURRIEI am dead against the Chancellor of the Exchequer being persuaded to accept this Clause. I hope he will turn it out. My hon. Friend (Mr. J. M. Henderson), in the course of his long and 424 distinguished professional career, has acted as undertaker at the obsequies of many companies. He has been guide, friend, and, I have no doubt, philosopher, to many such in his day. I am afraid the effect on him is that he has contracted a tender solicitude for people who are in financial difficulties, which I hope the House does not share. If people do business with companies or individuals who are either bankrupt or liable to bankruptcy there is no reason why the Chancellor of the Exchequer should step in and afford protection to concerns in that position. On the contrary, a company or person who trades in a state almost of insolvency is an extremely mischievous influence. The fact that this is a war tax and a tax on excess profits does not make any difference. The provisions of the Code Napoleon, which make that sort of thing very much more difficult in France than here, might very well be copied by us. Therefore I hope this Clause will be rejected. I am very sorry that the Chancellor of the Exchequer accepted from my hon. Friend the other day Clause 51 because he has accepted something which will not bring him revenue.
§ Mr. McKENNAI do not propose to accept this Clause, and I do not think that my hon. Friend (Mr. Henderson) thought I should accept it.
§ Mr. McKENNAI do not think so. If a firm of this kind is trading and making profits, the profits ought to be under the same rules as those of other firms. If it is insolvent, the firm should not trade at all. If it does trade and make profits, it cannot expect to get exemption from taxation merely on the ground that it ought never to have traded at all.
§ Mr. McKENNAMy hon. Friend does; not mean that by his Clause, which speaks of a company or firm which "on a fair and reasonable valuation of the assets," etc. Those terms are too vague. Many firms may, on a fair and reasonable valuation at a certain moment, owing to temporary fluctuations in the price of commodities, not be at that particular moment solvent, and they would claim the right to retain all excess profits. I do not think my hon. Friend has fully considered this Clause, and I regret I cannot accept it.
§ Question put, and negatived.
425Mr. HENDERSONI have given notice of two other new Clauses—1 (Provision as to Fixing Pre-War Standard of Profits); and 2 (Provision in Respect of Acceptance by Commissioners of Inland Revenue of Arrangements Made by Ministry of Munitions)—but having regard to the Clause which my right hon. Friend is going to introduce when the Bill is recommitted, I do not move them. The second Clause covers all the questions I wish to raise.