FINANCE BILL. (Hansard, 18 June 1934)

§ Mr. SPEAKER
The first new Clause on the Order Paper—[Repeal of tax on mutual profits]—would impose an additional charge, and consequently it is out of order.

§ Sir STAFFORD CRIPPS
May I ask if you will be good enough, Mr. Speaker, for the information of the House, to explain how an extra tax could be charged as the result of the passing of this Clause? As I understand the position, the point is that the original Clause exempts from taxation certain co-operative and other societies, as regards their taxation under Schedule A, and if this Clause were passed they would lose the benefit of the rebate under the original Clause. That rebate of taxation only arises because of the extra tax which was imposed by the legislation that this Clause is designed to repeal. In my submission, this Clause by repealing that tax cannot in fact impose any additional charge, because in the circumstances which this Clause will put back there would be no possibility of there being an additional charge.

§ Mr. SPEAKER
I do not think that this Clause, if it were accepted by the House, would of itself directly impose an additional charge, but it might have the effect of removing an exemption which the co-operative societies now enjoy under the existing law, and to that extent they might in certain circumstances have to pay more than they do at the present time, because they would not get that relief. If I might put it in more legal language, with which I am not so familiar, under the existing law an industrial and provident society if it makes a loss in trading is liable to pay tax, but it is entitled under Section 34 of the Income Tax Act, 1918, to claim relief in respect of that loss. If Section 31 of the Finance Act, 1933, were repealed and Sub-section 4 of Section 39 of the Income Tax Act, 1918, were reinstated, a society would remain liable to pay tax under Schedule A, but a claim for relief in respect of loss under Section 34 of the Income Tax Act, 1918, 24 would not be admissible. The hon. and learned Member will see, therefore, that the effect of this new Clause is merely one of getting back something in these circumstances both on the swings and on the roundabouts. The effect of this would be that what they lose on the one they might gain on the other, or vice versâ. As far as I am concerned, the only question I have to consider with regard to the inclusion of this new Clause in the Finance Bill is that the particular taxpayer affected would not be able to claim this remission in relief which he would otherwise be entitled to claim under the existing law.

§ Sir S. CRIPPS
May I point out, with respect, that the remission of which you speak is the remission of the extra tax imposed under Section 31, and it was because of the extra tax under Section 31 that the incidence of relief was given as regards the tax under Schedule A? This Clause will put back the taxpayer in exactly the position he was before Section 31 was passed. Therefore, the relief came in as part of the fresh piece of taxation, and it is absolutely essential that one should repeal the two together if one is going to repeal them at all.

§ Mr. SPEAKER
I am advised that the effect of this would not be the simple one of removing the tax imposed by the Finance Act of 1933, but would still leave the co-operative societies liable to be taxed under Schedule A. The effect of this Clause would be that, unless we repeal something else as well, they would not be able to get relief under another Section which they enjoy at the present moment. As a matter of fact, this Clause would not leave them exactly as they were, as it would have the effect of taking that relief from co-operative societies.

§ Mr. LEONARD
As one whose name is associated with the new Clause, might I say that this is the second effort to get on the Order Paper something that will enable us to return to the position prior to the last Finance Act. I can assure you that we have made a very special effort to remove the disability which we thought had attached itself to the previous Clause. The present Clause is the result of the efforts we have made and the guidance we have received from those who thought that it would meet the 25 position. From what you have stated, I am at a loss to find out whether there is any avenue at all through which we may reach the status quo.

§ Mr. SPEAKER
I am quite aware of the circumstances of the case that the inclusion of these words "in so far as," if inserted, is with a view of getting out of a difficulty. As to the advice which the hon. Member has had, I can only say that I have had advice in the opposite direction.