Seventh Schedule.—(PROFITS TAX (TRANSITIONAL PROVISIONS).) (Hansard, 15 July 1958)

§ Mr. Maudling

I beg to move, in page 51, line 26, at the end to insert: (5) Where it is shown to the satisfaction of the Commissioners of Inland Revenue that for the standard period of a body or society the dividends included in the gross relevant distributions to proprietors comprised an amount of an exceptional nature, or the rate of dividend was for other special reasons (unrelated to the amount available for distribution) exceptionally high, and that in consequence that rate of dividend is inequitable as a measure of liability to tax under this paragraph, the Commissioners may direct that the rate of dividend of the body or society for the standard period shall be treated for the purposes of this paragraph as reduced to such extent as appears to the Commissioners to be just in the circumstances. A body or society aggrieved by the decision of the Commissioners of Inland Revenue on an application for a direction under this sub-paragraph may appeal to the Special Commissioners, and all the provisions of the enactments relating to appeals against assessments to the profits tax (including the provisions enabling the Commissioners of Inland Revenue to make regulations) shall have effect with respect to any appeal to the Special Commissioners under this sub-paragraph. This Amendment has been put down to meet an important point raised on the Committee stage by my right hon. Friend the Member for Blackpool, North (Sir T. Low) and other hon. Friends arising from 1182 the provisions for the transitional period in the new Profits Tax arrangements which are based on a comparison of dividends paid for a standard year. It was pointed out in the course of the Committee stage discussion that dividends for the standard year might be abnormally high for some special reason, and that in these circumstances it would be unfair if no appropriate arrangements were made to meet these special conditions.

The new subsection provides that where it is shown to the satisfaction of the Commissioners of Inland Revenue that for the standard period the dividend included an amount of an exceptional nature or that the rate of dividend was for other reasons exceptionally high, then the Commissioners may direct that the rate of dividend for the standard period shall be treated as reduced to such an extent as appear to them just in the circumstances.

This is a fairly rough and ready way of dealing with the matter, but I think it is the only satisfactory one in the circumstances. Clearly, if there were special circumstances leading to a high dividend it would be unfair to treat that dividend for purposes of the transitional period unless the Commissioners had power to make adjustments that are right and proper in the circumstances. This Amendment will give them that discretion and meet the point made by my hon. and right hon. Friends.