HC Deb 12 June 1956 vol 554 cc471-3
Mr. Stevens

I beg to move, in page 38, line 47, to leave out "redeemable preference".

I understand that it is your wish, Sir Charles, that the Committee should discuss the next two Clauses coincidentally. Just as Clause 25 may be known familiarly as the Heelex Clause, so Clause 26 may be familiarly known as the Universial Grinding Wheel Clause. The Universal Grinding Wheel Company issued preference shares redeemable at a premium and the court held that that premium was not liable to distribution charge for Profits Tax purposes. As in the case of Heelex, so in the case of the Universal Grinding Wheel Company, the Inland Revenue decided to stop up a loophole, but, in contradistinction to Clause 25, which, as the hon. Member for Sowerby (Mr. Houghton) said, has no retrospective effect, Clause 26 has a retrospective effect. That I regret, and the object of the Amendment is to limit that retrospective effect.

Before 1st January, 1947, when a change took place in the way in which Profits Tax was levied, where companies had in issue preference shares redeemable at a premium, or loans redeemable at a premium, I see no reason at all in justice or in equity why those companies, which could have had no knowledge of what was to come subsequently, should now find themselves liable—because the Revenue wish to stop up a loophole—to a distribution charge for Profits Tax purposes. In view of the late hour, I do not propose to say more. I hope this speech has been as clear and lucid to my hon. and learned Friend as the last, and that he will be in an equally agreeable state of mind to accept the Amendment.

The Solicitor-General

Subsection (5) of this Clause has the effect of exempting from the operation of the Clause premiums paid on the redemption of capital pursuant to an obligation entered into before the Budget day of 1947 when we started into differential rates. As the Clause is drawn, that exemption is limited to premiums paid on the redemption of redeemable preference shares. The question the Amendment puts before the Committee is, ought the exemption to be limited to redeemable preference shares?

The Clause is drawn like that because normally it is not easy to see how there could be an obligation to redeem arising out of the actual terms of the issue at a premium, save in respect of what are strictly redeemable preference shares to be so described in the company's balance sheet under the appropriate provisions of the Companies Act. My hon. Friend and the Committee will understand that one has to bear in mind the distinction between a commitment to redeem at a premium at a fixed date and a commitment to redeem at a premium if and when the share should be redeemed at all.

3.0 a.m.

It may be, and having listened to my hon. Friend I would desire to look further at the matter, that there are, though perhaps not strictly as matters of obligation, some issues which do involve a commitment to redeem at a premium, a commitment entered into before Budget day of 1947. If that be so, then I would agree with my hon. Friend that it seems right and fair in principle that the treatment enacted by subsection (5) should be extended to those issues too. I can only say that, scavenging through the wily pages of the Stock Exchange Year Book, these issues seem to me to be rather rare birds, if there are any at all. But if my hon. Friend would be content with what I offer him, I would ask that we might have further time to consider this.

I cannot accept the wording of the Amendment. That would have to be further considered; indeed, I am not sure, as at present advised, that it actually effects the result which my hon. Friend desires. But if it be that there are share issues involving a commitment entered into before Budget day of 1947 to redeem at a premium when redemption does take place which fall fairly and squarely within the principle of the subsection, my right hon. Friend has authorised me to say that he will arrange for an appropriate Amendment to be set down on Report. I hope that, on that undertaking, my hon. Friend will give a further opportunity for thought by with-drawing his Amendment.

Mr. Mitchison

I hope that before that very careful offer is accepted, if it is to be accepted, by the mover of the Amendment, and the whole Treasury, not to mention the Law Officers' Department, are sent off on a wild goose chase without any assurance that there is such a thing as this wild goose, the mover will indicate that he can assure some of us of the actual existence of the bird. If he could add its name, it would be even kinder to his right hon. and learned Friends.

Mr. Stevens

I can assure the Committee that I would not have troubled it with non-existent birds. They may not be in large number, but I see no reason why, small though the number may be, they should suffer injustice on that score. I am certainly happy with my hon. and learned Friend's assurance, and beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clause 27 ordered to stand part of the Bill.