CLAUSE 17.—(General amendments of 12 and 13 Geo. 5, c. 17, s. 21.) (Hansard, 15 June 1936)

§ Mr. W. S. MORRISON
I beg to move, in page 15, line 15, after "incorporated," to insert "in any part of the United Kingdom."
This is to make clear that the provisions of Sub-section (3) extending the one-man company provisions of Section 21 of the Finance Act of 1932 to other incorporated bodies such as industrial and provident societies apply only to bodies which are incorporated in the United Kingdom. The existing provisions of the Act of 1921 apply only to companies in the United Kingdom, but that fact arises from the definition of a company in that Section, which says that it refers only to companies within the meaning of the Companies Act, 1908, and, of course, that means that a company can be only one 728 which is incorporated in the United Kingdom. The Clause as drafted did not make it clear that only bodies incorporated in the United Kingdom were intended. It would, of course, be quite impracticable to apply Section 21 to bodies established outside the United Kingdom, whether they were companies or other bodies. The Clause is designed to stop evasion of Income Tax by means of what is called the one-man company in the United Kingdom. It would be quite improper to leave any doubt that only United Kingdom bodies are intended.

§ Mr. W. S. MORRISON
I beg to move, in page 16, line 7, to leave out "otherwise than."
This Amendment has to be read with the following Amendment to leave out the word "not." The terms of the Clause say that share or loan capital or debt shall be deemed to be issued or incurred otherwise than for an adequate consideration, the value of which to the company is not substantially less than the amount of capital or debt including any premium. The two Amendments merely involve the replacing of two negatives by one positive, and I think the Committee will agree that it is better English.

§ Mr. W. S. MORRISON
I beg to move, in page 16, line 17, to leave out from "incurred," to the end of line 18, and to insert: for such consideration as is mentioned in the last foregoing paragraph or which represents, directly or indirectly, any share or loan capital or debt which itself was issued or incurred for such consideration. In Sub-section (4) it is declared for the purposes of the Clause what share or loan capital or debt shall be deemed to be issued or incurred otherwise than for adequate consideration. In other words, what we are trying to hit at here is the creation of a fictitious debt or loan charge by a man who gives money to a company, and then through a series of operations gets his money back as if it were a debt owed by the company to him. We are seeking to differentiate the true debt from the mere fictitious debt, 729 by saying that a debt to be within the Clause is such as arises without adequate consideration. It is to be deemed to be issued or incurred otherwise than for adequate consideration, if— (a) it is issued or incurred otherwise than for consideration the value of which to the company is not substantially less than the amount of the capital or debt (including an premium thereon), or if— (b) it is issued or incurred in or towards, or for the purpose of raising money applied or to be applied in or towards, the redemption or repayment of any share or loan capital or debt which itself was issued or incurred otherwise than for adequate consideration. These two paragraphs (a) and (b) are intended to constitute a definition of what is meant by the words "otherwise than for adequate consideration." They set out a little more fully for the guidance of tribunals what is meant by the term. If the Committee agree with the Amendment they will have a definition in a form which is clear and which will not lead to confusion.