HC Deb 11 June 1947 vol 438 cc1117-20

6.0 p.m.

Sir H. Lucas-Tooth

I beg to move, in page 22, line 43, to leave out "and all," and to insert "to the extent that."

I think it may for the convenience of the Committee, Mr. Beaumont if we discuss together this Amendment and the next two Amendments to this Clause—in page 22, line 44, and in page 23, line 2. Under Section 21 of the Finance Act, 1922, certain small private companies may be treated as partnerships by the Revenue. If they withhold from distribution an excessive amount of the profits which they earn, the profits which are not distributed can, nevertheless, be assessed as if they were the personal income of the members of the company, and subjected to Surtax The purpose of Subsections (2) and (3) of this Clause appears to be to exempt these incorporated partnerships—if I may call them so—from the Profits I ax altogether. I think it would be wrong that these owners of property should be subject to a special form of taxation by way of Surtax, on the one hand, and also this new special form of taxation by way of Profits Tax, on the other It would be double taxation. The purpose of this and the other two Amendments is to deal with the case where one of the members of the company happens to be a corporation. The wording of these two Subsections would appear to mean that it is only if all the persons concerned are private individuals that the privilege of exemption, in these circumstances, arises. I do not know whether that is the intention of the Government, but if it is I think it is very unfair, and there should be some amendment made to the Bill.

It may be that one shareholder in a private company is a trustee corporation, holding as the legal personal representative of a deceased shareholder. Curiously enough, although that circumstance is expressly dealt with in the early part of this Clause, in the last two Subsections no exception is made. If a member of a company is himself a mere trustee company that would exclude the benefit given by these two Subsections. The wording of Subsection (3) is a little obscure. There is the further possibility that a member of a private company would be beneficially entitled, as a corporation, to some part of the shares in that company. Even if only 1 per cent. or less of the shares in one of these incorporated partnerships were held by another company, it is clear that, whatever the construction of Subsection (3) may be, the benefit of Subsection (2) is ousted altogether. This Amendment is designed to cover that case, but to cover it only so far as members of the company are individuals. It brings into operation Clause 37, Subsection (2), which deals with the case where a business is carried on jointly by private individuals and a company. We seek only to bring in machinery here so as to give exemption to the private individuals, but to leave the company to be struck at by the main provisions of the Bill.

The Solicitor-General (Sir Frank Soskice)

We are much obliged to the hon. Member for putting down this Amendment, because we think that he has uncovered a defect in the Clause. If a public company does happen to be one of the sub-apportionees, it would not come within the Clause. We will look more closely at the wording before the Report stage, and we will give an undertaking that we will carefully reconsider the matter with a view to endeavouring to remedy it.

Sir H. Lucas-Tooth

I am much obliged to the learned Solicitor-General, and in view of that undertaking, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

Sir H. Lucas-Tooth

There is a question which I would like to ask on this Clause which arises under the proviso to paragraph (i) That proviso says: The reference in paragraph (a) of this Subsection to an unincorporated society or other body shall be deemed not to include a reference to individuals in partnership or to persons acting as the personal representatives of a deceased person. There is no reference to trustees acting as trustees. It may be found that businesses are being carried on by trustees who are not themselves technically legal personal representatives of a deceased person. I need not go into the legal technicalities. I am certain that the Solicitor-General will agree with me when I put it to him that there are cases in which trustees may be carrying on a business for quite an extended period, and I should have thought that the intention was to cover such cases. I did not give the Government notice that I was about to raise this point, and I shall be quite satisfied with an undertaking that it will be looked into between now and the Report stage of the Bill.

The Solicitor-General

We will willingly look into that point. It is questionable whether "personal representative" does in its ordinary connotation cover a trustee.

Clause ordered to stand part of the Bill.