§ Paragraph 12 of the Fourth Schedule to the Finance Act, 1937 (which enables an individual to claim, within one month from the end of a chargeable accounting period, that he shall be treated as respects that period as if he were a company for certain purposes of the national defence contribution), shall have effect and shall be deemed always to have had effect as if the following sub-paragraph were substituted for sub-paragraph (2) thereof—
§ "(2) Any claim under this paragraph shall be made by notice in writing to the Commissioners of Inland Revenue within six months from the end of the chargeable accounting period in question, or such longer time as the Commissioners may in any case allow."—[Captain Wallace.]
§ Brought up, and read the First time.
§ 8.7 p.m.
§ The Financial Secretary to the Treasury (Captain Euan Wallace)I beg to move, "That the Clause be read a Second time."
This Clause extends the time limit within which a firm may claim, for the purpose of National Defence Contribution, 1025 to be treated as if it were a director-controlled company in order to obtain an allowance for "directors' remuneration." The present time limit of one month after the end of the chargeable accounting period is extended by this Clause to six months, or such longer time as the Commissioners of Inland Revenue may allow. This limit has been found to be unreasonable, and as a matter of fact it has not been enforced in practice. The Clause carries out a promise which my right hon. Friend the Chancellor of the Exchequer made earlier this year to a deputation of the Association of British Chambers of Commerce. They said that whilst they recognised that the provision was not being enforced by the Inland Revenue, they were anxious to have some statutory confirmation of the existing practice, and the Chancellor of the Exchequer agreed that this was not unreasonable.
The House will appreciate that this option, like most options in this world, is double-sided; where either an individual or individuals in partnership avail themselves of the option referred to in this case, their firm becomes chargeable to National Defence Contribution as a body corporate instead of as a private business and therefore comes under the higher rate of 5 per cent. applicable to bodies corporate instead of the 4 per cent. applicable to private businesses. When the existing provision was put in last year's Finance Bill it was thought that it would be reasonable to ask firms to exercise this option at the end of one month from the conclusion of the accounting period, but the Commissioners of Inland Revenue, who are always anxious not to exact the uttermost farthing but to see that the taxpayer, large or small, gets a fair deal, realised that if the taxpayer had to make his decision at the end of such a short period he might not have time to make a proper choice; and it was therefore decided not to enforce the provision strictly. The present Clause makes the six months statutory, and indeed goes further than was suggested by the deputation by saying that the time limit may be even longer if in a particular case the Commissioners so decide.
§ Question put, and agreed to.
§ Clause read a Second time, and added to the Bill.