51. Mr. FOOT MITCHELL
asked the Chancellor of the Exchequer whether, with regard to the fact that guarantors to the British Empire Exhibition, who were also exhibitors, are permitted to make a deduction of the loss caused in respect of their guarantee from their respective returns for Income Tax purposes, whereas guarantors who were not exhibitors are not permitted to adopt this procedure, he will state why distinction is drawn between the two types of guarantors, and on what ground it is based?
§ Mr. CHURCHILL
The Income Tax Acts provide that in the computation of a trader's liability a deduction may be allowed in respect of expenditure which, not being of a capital nature. is wholly and exclusively laid out or expended for the purposes of the trade. With regard to expenditure incurred under the guarantee to the British Empire Exhibition, to which my hon. Friend refers, the Inland Revenue authorities have acquiesced in the view that in the case of guarantors who were also exhibitors. such expenditure, as and when incurred, may be regarded as part of the current expenses of their business and treated on the same lines as the cost of advertising generally. In such cases, therefore, the expenditure would normally be admitted as a deduction for Income Tax purposes, but in the case of guarantors who were not exhibitors, the connection between their businesses and the exhibition is too remote, having regard to decided cases in the Courts, to enable Payments made under the guarantee to be treated as a business expense.
Would my right hon. Friend consider the advisability of 1012 placing all the guarantors on the same footing, in view of the fact that the guarantee was made in order to encourage British industry and not for charitable purposes?
§ Mr. CHURCHILL
No, Sir; I cannot undertake to amend the Income Tax law to meet these particular cases. No doubt there appears to be some hardship, but it would be a difficult matter to alter the law to meet every hard case which from time to time might arise.