§ (1) Where for the purposes of section twenty-one of the Finance Act, 1922, or Chapter III of Part IX of the Income Tax Act, 1952 (which provide for the payment of surtax in certain cases, on undistributed income of companies), the actual income from all sources of a body corporate for a year or period ending after the end of the year nineteen hundred and fifty-one falls to be computed under paragraph 6 of the First Schedule to the said Act of 1922 or subsection (3) of section two hundred and fifty-five of the said Act of 1952, then, if any amount is payable by the body corporate by way of the profits tax or the excess profits levy, respectively, for any chargeable accounting period falling wholly or partly within that year or period, a deduction shall be allowed, in computing the said actual income, of such an amount as would, after deduction of income tax at the standard rate in force for the year of assessment during which the said year or period ends, be equal to so much of the amount so payable by the body corporate as is apportionable to the said year or period:
§ Provided that this subsection does not apply in relation to any chargeable accounting period ending at or before the end of the year nineteen hundred and fifty-one.
§ (2) Paragraph (a) of the proviso to subsection (2) of section two hundred and sixty-two of the Income Tax Act, 1952 (which relates 1267 to the deductions allowable in computing the actual income from all sources of an investment company in relation to which a direction is in force under subsection (1) of that section), shall have effect as if instead of authorising a deduction for profits tax payable by the company by way of profits tax or the excess profits levy, of such an amount as would, after deduction of income tax at the standard rate in force for the year of assessment in respect of which the direction is given, be equal to the first-mentioned amount.
§ (3) The last preceding subsection shall, in relation to any chargeable accounting period ending after the end of the year nineteen hundred and fifty-one, apply to paragraph (a) of the proviso to subsection (2) of section fourteen of the Finance Act, 1939, as it applies to paragraph (a) of the proviso to subsection (2) of section two hundred and sixty-two of the Income Tax Act, 1952.
§ (4) If—
- (a) the amount payable by a body corporate in respect of the excess profits levy for any chargeable accounting period is reduced by reason of a deficiency of profits for a subsequent period; and
- (b) the amount deducted under the preceding provisions of this section in computing the actual income from all sources of the body corporate was arrived at without regard to the reduction and is excessive in view thereof,
§ (5) For the purposes of this section—
- (a) any amount recovered under paragraph 18 of the Eleventh Schedule to this Act by one member of a group from another member shall be treated as an amount of excess profits levy payable by that other member and as correspondingly reducing the amount of excess profits levy payable by the first-mentioned member;
- (b) any amount paid by a subsidiary to the principal company (as defined in section twenty-two of the Finance Act, 1937) by way of reimbursement of profits tax which, by virtue of a notice having been given under the said section twenty-two, was paid by the principal company shall be treated as an amount of profits tax payable by the subsidiary and as correspondingly reducing the amount of profits tax payable by the principal company.—[Mr. Maudling.]
§ Brought up, and read the First time.
§ The Parliamentary Secretary to the Ministry of Civil Aviation (Mr. R. Maudling)
I beg to move, "That the Clause be read a Second time."
This Clause deals with a very small point relating to one-man companies. Where the income of a one-man company is wholly apportioned for Surtax pur- 1268 poses it is not affected by the Excess Profits Levy or by Profits Tax; but cases may arise when the income of a one-man company will be partly but not wholly apportioned.
In such cases, under the Profits Tax system existing until the end of 1951, the gross amount of Profits Tax was treated as a deduction for Surtax purposes. As the Committee is aware, a change has been made in this Finance Bill in that, in future, Profits Tax is to be charged at a net rate and shall not rank as a deduction. That applies only to Income Tax and not to Surtax and, in order to avoid circumstances in which shareholders in one-man companies might have to pay surtax on sums paid for the Excess Profits Levy, this Clause is designed to re-enact the Profits Tax system, whereby the gross equivalent of E.P.L. paid will be taken off in full for Surtax purposes in cases where there is a partial apportionment.
That is the sole purpose of this new Clause. It is a small point, but it is intended to remove what may be a very grave inconsistency.
§ Clause read a Second time, and added to the Bill.