§ 20. Mr. J. H. Osbornasked the Chancellor of the Exchequer whether tax reserve certificates purchased by a company may be utilised in future in payment of Corporation Tax or in payment of Income Tax deducted from dividends to shareholders.
§ Mr. MacDermotIt was announced some time ago that tax reserve certificates of the present series and of future series may be used for payment of Corporation Tax. My right hon. Friend has now decided that they may also be used for payment of Capital Gains Tax. Future series held by companies will not be available for payment of Income Tax deducted from dividends.
§ Mr. OsbornIs the hon. and learned Gentleman aware that the last part of his Answer will cause disappointment? We welcome the fact that he is able to give this statement now, but is it not a little late—12 months after the Finance Act? Will he now make certain that the usual channels are aware of this information, so that industries which have not known where to go may now obtain the correct advice?
§ Mr. MacDermotFull particulars will be available in the new prospectus for any new series. This is not the occasion either for great surprise or disappointment. Income Tax on dividends is not a tax on company profits; it is a tax on shareholders' incomes, which is paid by the company as collecting agent. The analogy is that of P.A.Y.E., and tax reserve certificates have never been available for that.
§ Mr. Peter EmeryBut does not the hon. and learned Gentleman realise that the tax situation has been greatly altered since last year's Finance Bill, that new principles now have to be observed by firms, and that there is a considerable pressure for the Chancellor to reconsider this matter so that the latter part of the Answer could be reversed?
§ Mr. MacDermotI am aware that substantial changes have been made in our taxation system by last year's Finance Bill. The decision made is clearly in accordance with the principles on which those tax reforms were based.