Sixth Schedule.—(PURCHASE AND SALE OF SECURITIES: "APPROPRIATE AMOUNT IN RESPECT OF INTEREST.") (Hansard, 10 June 1959)

§ Mr. Simon

I beg to move, in page 32, line 19, at the end to insert: Provided that, where the capital amount of the securities was not fully paid at the beginning of the said period and one or more instalments of capital were paid during that period—

(a) the interest shall be treated as divided into parts, calculated by reference to the amount of the interest attributable to the capital paid at or before the beginning of the said period and the amount thereof attributable to each such instalment, and
(b) treating each of the said parts as interest payable for the said period or, where the part was calculated by reference to any such instalment, as interest payable for the part of the said period beginning with the 1054 payment of the instalment, there shall be calculated, in accordance with the foregoing provisions of this paragraph, the amount constituting the appropriate proportion of each part, and
(c) the appropriate proportion of the interest for the purposes of the foregoing paragraphs shall be the proportion thereof constituted by the sum of the said amounts.

This is a complicated Amendment. It is the sort of Amendment to which the Royal Commission referred when it said, of tax legislation: Not infrequently its conceptions represent an attempt to dress what are really mathematical formulae in the vesture of English prose. This is one of those cases where it is impracticable, unless one is prepared to put an algebraical formula into the Statute Book, to expect that we can legislate with the simplicity we all desire.

The purpose of the Amendment is to lay down a formula for apportioning, up to the date of purchase, the first interest payment on a security where that security has not been bought outright but has been issued on terms that the total amount to be subscribed would be paid up by two or more instalments over a period. This point was drawn to our attention by my hon. Friend the Member for Basingstoke (Mr. Denzil Freeth) and I should like to express our appreciation to him.

The context is the principle of the Schedule, generally, whereby, as hon. Members have seen, we try to carry out two purposes. The first is to say whether the appropriate amount of interest should be the net interest or the gross interest. We have said that in Clause 19 it should be the net interest and in Clauses 20 and 21 it should be the gross interest. We have tried to arrive at a fair apportionment of the proportion of the dividend to be debited to the taxpayer, the bond washer. It is obviously right that if, for example, he has to hold the bond for five months before it goes ex-dividend the whole of the interest should not be debited against the loss he claims for tax purposes, but only the interest for one month.

A formula is set out in paragraph 3 of the Schedule, but it did not cover the case where there is a payment by instalments for a security of, say, £300 on application, £100 at one month after the date of issue and the final £100 six months after the date of issue. I can go 1055 into the matter in greater detail if the Committee wishes me to do so, but, unless there is that desire, perhaps it is sufficient that I commend the Amendment to the Committee.