HC Deb 02 December 1941 vol 376 cc1002-3
47. Sir Irving Albery

asked the Chancellor of the Exchequer which of the following financial arrangements of an ordinary trading company are treated as cash, and which as investments, for the purposes of estimating Excess Profits Tax, namely, money on deposit at call, money on deposit at short notice, and Treasury bills?

Sir K. Wood

As I explained in my reply of 20th November to my hon. Friend's previous Question on this subject, the capital to be taken into account for the purposes of Excess Profits Tax is that capital which is employed in the business. In the case of the ordinary trading concern investments in Government securities, including holdings of Treasury bills, cannot be regarded as capital so employed. The extent to which cash, including moneys held at bank on call or at short notice, falls to be regarded as capital employed in a business depends upon the circumstances of the individual case, and if the cash held exceeded what was required for the purposes of the business the excess could not be treated as capital employed. My hon. Friend will appreciate that capital employed in a business ranks for allowance at eight or ten per cent. in the computation of a concern's liability to Excess Profits Tax and it is important that it should be clearly understood that this high return cannot be allowed on idle funds which are really not in use in the business but are available for investment in the Government securities now on issue.

Sir I. Albery

Have I correctly understood the Chancellor to differentiate between Treasury bills and the other use of money mentioned in the Question?

Sir K. Wood

There is a certain differentiation if the hon. Member will study my reply between investments in Government securities and holdings of Treasury bills and moneys held at bank on call or at short notice.

Sir I. Albery

Is the Chancellor aware that that differentiation is quite out of keeping with all ordinary banking and commercial practice?

Sir G. Gibson

Has the Chancellor visualised the position there might conceivably be of a business man with a comparatively small balance at the bank who desires to aid the war effort and invest his money in War Loan and then desires to use that later to secure an overdraft in taking up—

Mr. Speaker

That is too complicated a question.

Sir G. Gibson

May I ask the Chancellor whether he is aware that such a business man, in his desire to aid the war effort, is losing 8 per cent., because the amount he has invested is disregarded as capital, and—

Mr. Speaker

This is too complicated for a Supplementary Question.