§ Paragraph six of Part I. of the Fourth Schedule to the principal Act shall have effect as if the following proviso were added thereto:—
§ Provided that, if in any case hardship arises from such combined assessment of two companies, the Commissioners may, 984 upon the application of the taxpayers or either of them, direct that they be assessed separately or make such other modification of this rule as to them may appear just in the circumstances, and if on any such application any applicant is dissatisfied with the decision of the Commissioners, he may require the Commissioners to refer the case to a Board of Referees, to be appointed for the purpose by the Treasury, and that Board shall consider any case so referred and have the same powers with respect thereto as the Commissioners have.—(Sir J. Harmood-Banner.]
§ Clause brought up, and read the first time.
§ Sir J. HARMOOD-BANNER
I beg to propose, "That the Clause be read a second time."
Section 6 of Part I. of the Fourth Schedule of the Finance (No. 2) Act, 1915, provides, "Where any company either in its own name or that of a nominee owns the whole of the ordinary capital of any other company carrying on the same trade or business, or so much of that capital as under the general law a single shareholder can legally own, the provisions of Part III. of this Act as to Excess Profits Duty and the pre-war standard of profits shall apply as if that other company were a branch of the first-named company and the profits of the two companies shall not be separately assessed." It has been brought to my attention by the Coalowners' Association that in many cases this Clause operates very harshly, and the object of the Amendment is to enable the Government under the conditions set forth to deal with the matter.
§ Mr. MONTAGU
Let us suppose that the parent company makes a profit and the subsidiary company a deficit. Since the profits or losses of both companies are paid out of the same pockets or go into the same pockets, it would be a monstrous thing if the parent company, in assessing excess profits, were not permitted to take into account the deficiencies of the subsidiary company. Similarly, if the parent company and the subsidiary company both made profits, it would be a ridiculous thing if the two companies were to be assessed on totally different standards and different bases. Let us suppose that the parent company made in pre-war years 10 per cent, and the subsidiary company 5 per cent. If they were treated separately the 985 parent company would probably choose to be assessed on actual profits and the subsidiary company on the percentage, standard. So I think the House was right in deciding that they should be treated as a whole. The hon. Member does not here suggest that that rule should be repealed, but once again he suggests that the Commissioners of Inland Revenue with a power of appeal should be allowed to alter the rule and therefore to alter taxation in cases of hardship. I once again protest against the desire to give to the Inland Revenue power of taxation. Such a discretion is invidious and difficult to use. What is a case of hardship? I know of no case of hardship. I would suggest a case of hardship must be a case in which some individual company finds itself being taxed and wants to try and get the best of both worlds.
§ Sir A. MARKHAM
I do not think the right hon. Gentleman appreciates the significance of this Amendment. The original proposal was altered in the Committee stage, and now where the whole of the ordinary capital is held by the parent company the two companies are treated as one. In a case within my own knowledge, where a large company some two or three years ago acquired another large company, all the shareholders of the second company agreed to sell except one man, who with very few shares refused to do so. Because he refused to sell the company who acquired the interest in the second company escape taxation and are separately assessed. What the company has done is to insure that man's life, because if he were to die they would be treated as one company and assessed accordingly. As the Bill was originally drawn in 1915 that case would have been provided for, but now, because a man who holds ten shares out of a capital of £700,000 refuses to sell, the companies are treated separately. Surely that is not fair.
§ Sir A. MARKHAM
I am taking an exactly opposite view in order to call attention to the absurdity of the Act as it stands at present. I think what I have said shows that the Act wants amendment.
§ Question, "That the Clause be read a second time," put, and negatived.