HC Deb 02 July 1968 vol 767 cc1335-8


  1. (1) This section applies to any provision in arrangements having effect by virtue of section 347 of the Income Tax Act 1952 which—
    1. (a) applies to any company which controls, directly or indirectly, not less than a stated fraction of the voting power of a company resident in a specified territory outside the United Kingdom, and
    2. (b) in allowing credit against United Kingdom tax on dividends paid to any such company by the company so resident, authorises account to be taken of tax payable by the company so resident in respect of the profits out of which the dividends were paid.
  2. (2) Credit shall be allowed as if the provision treated the subsidiary of a company which owns, directly or indirectly, the stated fraction of the voting power of a company resident in the specified territory as if that subsidiary also owned that fraction of the voting power of the company so resident.
  3. (3) Credit shall not be allowable both by virtue of this section and under Schedule 17 to the Income Tax Act 1952 in the case of the same income. For the purposes of this section a company is a subsidiary of another if the other company controls, directly or indirectly, not less than fifty per cent. of the voting power of the first company, and this section shall be construed as if it formed part of Schedule 16 to the Income Tax Act 1952.
  4. (4) This section has effect as respects dividends paid (in the sense of section 89(4) of the Finance Act, 1965) on or after 1st April, 1968. —[Mr. Harold Lever.]

Brought up, and read the First time.

The Financial Secretary to the Treasury (Mr. Harold Lever)

I beg to move, That the Clause be read a Second time.

The Clause has an interesting history in that it is an attempt, and I think a successful attempt, to meet a point raised in Committee by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin). He moved an Amendment on which we had, and still have, alas, different interpretations as to its effect. The Clause is intended to meet the effect that his Amendment had in his opinion. That being the relevant factor, I hope that the hon. Gentleman will accept the Amendment. It is a highly technical one which, I hope, will meet with the approval of the House without our having to grapple with the wholly irrelevant considerations of whether his original Amendment would have had the purpose he thought, and no doubt still thinks, it had, and not the pur- pose we thought, and still think, it had. Since we are all agreed that the purpose he intended was a valid one, we have met it by the Clause, which I hope will commend itself to the House.

Mr. Patrick Jenkin

The Financial Secretary has reminded the House that this Clause was the one where we had a dispute in Committee as to what the Amendment which I moved meant. I have no wish to try to justify the view which I then held, namely, that the speech which I made was directed to the Amendment that I had moved. I have been satisfied that I was right. Equally, the Financial Secretary has been satisfied that he was right. I do not think that any profit would be gained from seeking to argue the case as to which of us, in fact, was right. Certainly, Mr. Deputy Speaker, I would not seek to ask you to judge in the dispute between us.

However, I think it right to say, as it were in justice to those on whose advice we on this side have to rely, that in Committee I suggested that, so certain was the Financial Secretary that he was right, it was conceivable that I might have been wrong. As a result, we were both somewhat unfairly pilloried in a scathing leading article in the Daily Mail, of which the only part I agree with was the title, which said: The farce in Committee Room Ten must stop. As my right hon. Friend had been saying this for some weeks, I cheered at that point, but, when I read it, I felt that we were being unfairly attacked.

This was exactly the sort of case which, on the Government's argument, was thought might be dealt with more effectively by experts in Committee upstairs, but we have still been unable to resolve our differences. The only point that I would make before coming to the new Clause is that it gives one serious cause to wonder whether the method by which we choose to debate these complicated financial matters in Finance Bills is that best designed to serve the ends which hon. Members on both sides have at heart.

My hon. Friend the Member for Cities of London and Westminster (Mr. John Smith) likened our operations to those of two operators of one of those pier mechanical cranes with which one tries to pick out prizes from amongst a mass of sugar beans, with the Government and the commercial interests concerned operating by indirect control through the Treasury Ministers and hon. Members of Her Majesty's Opposition. This is a simile which I find attractive. It is not an altogether unfair description of the way in which we work.

Purely as my own idea, I would throw out the suggestion that it might be more convenient for these highly technical questions of taxation to be considered by a small Select Committee of perhaps four or five hon. Members, who could hear expert evidence and then present to the House a reasoned view as to the Amendments which ought to be made.

Mr. Robert Sheldon (Ashton-under-Lyne)

Has the hon. Gentleman thought—

Mr. Deputy Speaker (Sir Eric Fletcher)

Order. On Report, I do not think that we ought to debate the suggestion that the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) is throwing out.

Mr. Jenkin

Mr. Deputy Speaker, I had not intended to say any more than that.

Turning briefly to the new Clause, we on this side of the House welcome it. It meets entirely the case that I put in Committee, namely, that the test of control in the case of a group of companies owning shares in a company operating overseas should be the same, whether the relief claimed is treated relief or unilateral relief. In other words, the share should be the same for subsidiary companies in both cases. This seems to be a small but welcome improvement, and I would express the gratitude of this side of the House to the Financial Secretary for having considered the case put before him.

Mr. Raymond Gower (Barry)

I hope that the Financial Secretary will not think it presumptuous of me, because I appreciate that every care has been taken in this drafting, but I am not happy about the wording of subsection (l)(a) when it refers to not less than a stated fraction ". I hope that the hon. Gentleman is quite sure that that wording is exact enough. He will appreciate that it may be necessary in due course for the Clause to be interpreted, and it is a very loose form of words. Almost anything could be interpreted as being "a stated fraction". It might be one-hundredth. It might be 50 per cent.

Mr. Harold Lever

A stated fraction will be that relevant in relation to the double taxation treaties to which it applies. That is an exact number and causes no discretionary power to come into operation.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

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