In sub-paragraph (3) of paragraph 4 of Schedule 17 to the Finance Act 1965 the words ' company and that other company' shall be substituted for the words ' three companies' in both places where they occur.— [Mr. Patrick Jenkin.]
§ Mr. Deputy Speaker (Sir Eric Fletcher)
I suggest that at the same time we take the Government Amendment to the new Clause.
§ Mr. Jenkin
The appearance of the Chancellor's Amendment to the Clause encourages me to move it extremely briefly. It is concerned to make a very minor amendment to the rules about dividend stripping, and I shall resist the temptation to describe at length to the House how those rules operate. Suffice it to say that they prescribe special treatment for dealings between associated companies, and the full rigours of Section 65 of the 1965 Act do not apply if certain conditions are satisfied.
Schedule 17 of the 1965 Act sets out some of the detailed rules and paragraph 4(3) of that Schedule deals with dealings between associated companies. However, the Schedule is rather strangely worded in that it is not only the selling and the buying company which must be associated, but also the company in whose shares the dealings are being made. It has been suggested to us that this is an unnecessary refinement and that the relaxation of the normal rules could equally well be applied if it were a company which was in no way associated with the transferor and transferee company, and the new Clause makes this very small but desirable change.
Perhaps I should indicate that the Amendment seems to us to be a reasonable improvement and we shall have no difficulty about accepting it. In the hope that with the Amendment the Government may be able to accept the Clause, I have pleasure in commending it to the House.
§ Question put and agreed to.
§ Clause read a Second time.1544
§ The Chief Secretary to the Treasury (Mr. John Diamond)
I beg to move, as an Amendment to the proposed Clause, at end insert:(2) This section applies to a distribution made after 10th April, 1968.The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) was as accurate as ever in describing the condition which the new Clause seeks to remove. It is a condition which at one time we thought necessary for the protection of the revenue where there was this group relief in connection with dividend stripping. We are prepared to believe that it is no longer necessary and in those circumstances I was happy silently to accept the hon. Gentleman's proposal. I have risen only to thank him for the way in which he has moved the Clause.
The Amendment, which he has indicated would be acceptable to him, is one providing for a starting date for the relaxation. Without a starting date, the matter would be open to some doubt. The date is the appropriate one, the same as has been taken for Capital Gains Tax changes in Schedule 12, which already in-includes one relaxation of the same dividend-stripping rules.
§ Amendment agreed to.
§ Clause, as amended, added to the Bill.