Companies (Political Activities)

HC Deb 05 February 1959 vol 599 cc566-9

38. Mr. Frank Allaun

asked the Chancellor of the Exchequer how many claims he has received from steel companies during the past year for the exemption from tax of sums paid out for a campaign against steel nationalisation; and what is the total sum involved.

Mr. Simon

No such claims have been notified to the Head Office of the Inland Revenue; but the accounts received during 1958 have related to a period before the start of the "campaign" to which the hon. Member refers. I cannot, in any case, undertake to give any information about the affairs of individual taxpayers, or about such a narrow group as would amount to disclosure of the affairs of individuals in that group.

Mr. Allaun

Is the hon. and learned Gentleman aware that company accounts covering the period of this campaign must now have been submitted? [HON. MEMBERS: "Why?"] I will tell hon. Members why. It is because the campaign started before the end of the last accounting period. Is it not clear that unless this expenditure has been separately stated in those accounts it must have been merged with commercial advertising and thus have escaped Income Tax?

Mr. Simon

I am certainly not going to discuss the tax affairs of any individual concern. I would merely remind the hon. Gentleman that the accounting period for the major steel companies goes up to September.

Mr. Allaun

Exactly.

Mr. H. Morrison

Does not the Financial Secretary realise that a point of general administrative policy and principle is involved in this? Does he think it right that firms that are spending substantial sums on political activity representing their class interests should be able to get Income Tax relief and thereby get subsidisation from the Treasury for their class and political campaign at the expense of the other taxpayers? Will he not tell the House which are the firms that are doing that sort of thing?

Mr. Simon

I will be answering Question 40 about the extent to which political activities can be claimed as an expense against taxable income, but I should make it plain that, in general, expenses incurred in political activities are not deductible. The only expenses that can be deducted are those that are wholly and exclusively incurred for the purposes of the trade.

Mr. Morrison

In those circumstances, are we to conclude from what the Financial Secretary has said that the firms will not get Income Tax relief in respect of this expenditure?

Mr. Simon

No, Sir. This is a matter of the law. The law imposes a strict test, and one that was unanimously endorsed by both the Royal Commission and the Millard Tucker Committee. The test is to show that the expense was not of a capital nature and was incurred wholly and exclusively for the purposes of the trade. If that test is satisfied it is a deductible expense.

Mr. Maddan

In view of the allegations about the nature of the research referred to, is my hon. and learned Friend aware that today the Chairman of the Market Research Society has clearly stated that, from information volunteered to him, this survey is professionally within the long-established rules of the Market Research Society; and that he has further stated that if the General Secretary of the Labour Party does not welcome this assurance, he must be more anxious to generate—rather than to express—anxiety and alarm?

Mr. Simon

Yes, Sir, I have seen the report.

Mr. H. Wilson

If it is in order to refer to this particular market survey in a supplementary question, is the hon. and learned Gentleman aware that the man who at great expense sponsored the survey himself stated at the weekend that he was holding on to the names for whatever purposes he considered fit—[HON. MEMBERS: "Why not?"]—which could include electoral purposes and possible industrial victimisation? Is he aware that for our part we welcome the statement of the market research authorities that the man who sponsored the survey was wrong?

Mr. Simon

The right hon. Gentleman always keeps his ear so close to the ground that I suppose he is bound to get it full of dirt.

40. Mr. H. Wilson

asked the Chancellor of the Exchequer whether he will ensure, by regulation or otherwise, that outlays of business firms for the purpose of political canvasses and political propaganda as distinct from expenditure on market research for sales and other trade purposes are not allowed to rank as business expenses in the computation of liability for Income Tax and Profits Tax.

Mr. Simon

Expenditure by a trader directed to political ends and not incurred wholly and exclusively for the purposes of his trade is not allowable in computing taxable profits.

Mr. Wilson

I welcome the statement of the hon. and learned Gentleman that, as we suspected, there was dirt in this business, but will he go into this case very carefully, bearing in mind that we are not concerned with genuine market research activities designed to promote trade, sales, exports and so forth? Will he make sure that, if the regulations are not clear, new regulations or, if necessary, new legislation will be introduced to deal with this matter and prevent these things from being done at the taxpayers' expense?

Mr. Simon

The present law is eminently reasonable and equitable. All Members of the House will agree, for example, that if there were a United Kingdom company operating abroad and subjected to an untruthful and unscrupulous campaign designed towards the expropriation of its assets it should be able to take steps to answer that campaign, and the expense of those steps should be deductible from its taxable profits.

Mr. Wilson

Since my Question did not relate either to Tate & Lyle or to any campaign to answer threats of expropriation of assets but related to an activity which, on the authority of the sponsor, was purely directed to ascertaining public opinion on certain facts, which in any case are published in the Ministry of Labour Gazette, will the hon. and learned Gentleman say what was the relevance of his answer?

Mr. Simon

Perhaps I should make plain that in any case of a political nature it is the practice of the Inland Revenue, when in any doubt, to challenge the claim for a deduction and to leave it to the taxpayer to make his case on appeal.

Mrs. Mann

On a point of order, Mr. Speaker. My Question No. 68 is on all fours with Question No. 40. Why was the usual practice not adopted of answering both together today? Was it to deprive me of a supplementary?

Mr. Speaker

I do not think there is any sinister intent, I was given no notice that they would be answered together.

Mr. Woodburn

Further to that point of order. Mr. Speaker. Is it not the case that my hon. Friend the Member for Coatbridge and Airdrie (Mrs. Mann) was herself personally subjected to this investigation and could, therefore, contribute something in her supplementary question?