HC Deb 12 July 1965 vol 716 cc222-3

Amendment proposed: Amendment No. 217, Schedule 16, in page 211, line 38, leave out "that other" and insert "the third".—[Mr. MacDermot.]

Mr. Heath

Are we to have any explanation of this Amendment?

Mr. Callaghan

It would probably be more convenient to refer to it when we discuss Amendment No. 218.

Amendment agreed to.

Farther Amendment made: Schedule 16, in page 213, line 4, after "districts)", insert: or under section (Annual allowances for new ships) of this Act".—[Mr. Diamond.]

12.30 a.m.

Mr. Diamond

I beg to move Amendment No. 218, Schedule 16, page 214, line 19, at the end to insert: 8.—(1) As respects dividends paid before the year 1966–67 section 4 of the Finance (No. 2) Act 1955 shall have effect for corporation tax notwithstanding the exclusion from the charge to corporation tax of distributions received from companies resident in the United Kingdom; and any other enactment operating by reference to the said section 4 shall apply accordingly. (2) Where—

  1. (a) a company carries on a trade other than such a trade as is mentioned in subsection (1) of section 4 of the Finance (No. 2) Act 1955; or
  2. (b) the business of a company consists wholly or mainly in the making of investments;
and in the year 1965–66 the company receives a dividend the net amount of which would, if the company carried on such a trade as is mentioned in the said subsection (1), be required to any extent to be brought into account for tax purposes as a trading receipt which has not borne tax, then so much of the said net amount as would have been required to be brought into account as aforesaid shall for the purpose of corporation tax in respect of chargeable gains be treated as if it were a capital distribution (within the meaning of Part III of this Act) received in respect of the stock or shares on which the dividend is paid, and to that extent paragraph 2(1) of Schedule 6 to this Act shall not apply thereto. This Amendment clarifies the transitional arrangements under Schedule 16 connected with dividend stripping in two respects. The first concerns the position of companies the trade of which consists of dealing in shares or other investments, that is, dealing companies. Under the present law in Section 4 of the Finance (No. 2) Act, 1955, such companies must bring the net amount of the stripping dividends into account as a trading receipt. The new paragraph makes it clear that Section 4 of that Act shall apply for Corporation Tax purposes in respect of dividends received before 1966–67.

The second paragraph of the Amendment makes parallel provision in respect of stripping dividends received in 1965–66 by companies which are not for Income Tax purposes treated as dealers. The Amendment in page 211, line 38, which we have just passed, was purely for clarification and led up to this Amendment.

Amendment agreed to.