DISALLOWANCE OF TRADING LOSSES (Hansard, 17 July 1969)

§ The Chief Secretary to the Treasury (Mr. John Diamond)
I beg to move Amendment No. 144, in page 126, line 40, after decide ', insert— `for the purposes of paragraph 1(b) or (c) above '.

§ Mr. Deputy Speaker (Mr. Sydney Irving)
We may take, at the same time, the following further Amendments: No. 289, in Clause 24, page 27, line 32, at end insert: Provided that this section shall not apply to transactions within a group of companies which are under the common control of any one of those companies. No. 280, in Schedule 15, page 126, line 46, at end insert: (d) any acquisition of a holding by a company from another company at time when both are members of a group of companies within the meaning of Paragraph I sub-paragraph (b) of Schedule 13 to the Finance Act 1965 shall be left out of account. No. 281, in page 127, line 1, leave out '(d)' and insert '(e)'.
No. 282, in page 127, line 4, leave out '(e)' and insert '(f)'.
No. 148, in page 127, line 24, at end insert:

§ Mr. Diamond
I hope that it may be convenient to take, at the same time, the three other Government Amendments, Nos. 145, 146 and 147.

§ Mr. Deputy Speaker
Yes, if that is agreeable to the House.

§ Mr. Diamond
The Government Amendments are consequential, but they are consequential upon a promise which I gave in Committee to have regard to the point made in an Amendment then moved by the Opposition relating to the loss-buying provisions and, in particular, relating to the effect of the loss-buying provisions on inter-group share transactions.
I made it clear that the Amendment then being discussed was not acceptable as it stood. Having looked into it, we are introducing these Amendments, of which No. 148 specifically meets the point which was discussed in Committee by requiring that changes in ownership of a company within a group shall be disregarded if after the change the group relationship subsists.
The Clause, therefore, remains fully applicable to loss-bearing companies entering and leaving the group. The test of group relationship—perhaps I should say this having regard to other Amendments—is the 75 per cent. test already provided for the purposes of the Schedule in paragraph 5.
The previous four Government Amendments are put down because there was a risk that paragraph 2(c) as it stands could be invoked not only to aggregate the holdings of the loss-buyer and those connected with him—that was the sole purpose of the sub-paragraph—but also to make the shareholding test inapplicable where the loss-buyer and loss-seller are connected persons.
If, for example, the loss-buyer and the loss-seller enter into a partnership they become connected persons. Perhaps that is a little far-fetched, but, supposing that they were minded to do so, and they became partners and accordingly connected persons, by virtue of paragraph 2(c) of Schedule 15 they should be treated as though they were one and the same person. The effect of that would be that no acquisition of shares had taken place, so that, even if the buyer did acquire 100 per cent. of the shares of the loss-bearing 914 company, there is for the purposes of the Clause no change of ownership.
The first two Amendments are designed to remove entirely the possibility of such a damaging construction in subparagraph 2(c).