HC Deb 15 April 1958 vol 586 cc61-2

I now turn to a small group of proposals which I have felt bound to include for the protection of the Revenue. The first has to do with an activity known as dividend stripping. The Committee may remember that this is a device for extracting the liquid taxed reserves of one company with considerable, and unjustified, Income Tax advantage, to another company which gets those reserves as taxed dividends, and at a considerable cost to the revenue.

Although my right hon. Friend the Lord Privy Seal dealt with this in his autumn Budget of 1955, and despite stern warnings given then, I am sorry to say that apparently the fascination of dividend stripping is such that it is still being practised by some. Although the form of the device has somewhat altered—it is now largely practised by companies with trading losses—it remains quite unacceptable and I must put a stop to it.

My right hon. Friend the Minister of Housing and Local Government gave clear warning in 1955, in another capacity, that the Government would not hesitate to legislate against subsequent attempts at dividend stripping, and to make such legislation retrospective. Accordingly, the provisions I now propose will be retrospective to 26th October, 1955, which was the governing date of the earlier legislation. This should make good a loss of revenue of £2 million a year. But the gain this year will be about £4 million because of the retrospection.