MITIGATION OF CORPORATION TAX LIABILITY OF COMPANIES CARRYING ON MUTUAL INSURANCE BUSINESS (Hansard, 10 July 1973)

§ Mr. Ridley
I beg to move, That the clause be read a Second time.
The clause deals with the corporation tax position of insurance companies. Section 96 of the Finance Act 1972 provides for a lower rate of corporation tax—40 per cent. instead of 50 per cent.—for industrial and provident societies which are registered as industrial and provident societies. This occurs because such societies do not make profits and do not make distributions in terms of the Income and Corporation Taxes Act 1970.
There are, however, a certain number of insurance companies which happen to be registered as companies under the Companies Acts, though they behave in an identical fashion to the mutual societies, do not make distributions and are subject to corporation tax on unfranked investment income. There is a genuine difficulty in that this concession, which seems fair and reasonable in terms of mutual societies, extends only to those who happen to be registered as such, not those who behave as such and are registered under the Companies Act. The number of companies concerned is only about half-a-dozen and the amount involved in making these concessions is about £500,000. But in the interest of equity between two identical organisations, I hope that my hon. Friend will be able to accept the clause and I look forward to hearing him say that there is no difficulty in his so doing.

§ Mr. Nott
As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) knows and as was mentioned in the last debate on trade unions, a consultative document was sent out by the Revenue last August, and, following the dispatch of that document, we have received representations on behalf of the mutual insurance companies in reply. The British Insurance Association and the Life Offices Association have put forward their views on the point which my hon. Friend raised.
My hon. Friend was referring, as he said, only to a very narrow group of companies. The majority of mutual companies either fall within the small companies exemption or can register under the Industrial and Provident Societies Act. My hon. Friend is suggesting that we should now pick out this small group of companies and deal with them separately.
The position is that we have sent out the consultative document in order to get views on how we should deal with unincorporated associations generally. We are now reviewing the replies which have come in and, pending our action on this matter, it would not have been appropriate to bring in special measures to deal with the very small number of companies involved.
If the problems of definition can be overcome—and it is these which have been holding up the matter—in time for next year's Finance Bill, it will in practice take effect from the start of imputation, as the 1973–74 rate of tax will under normal Budget procedures be announced in the 1974 Budget.
We are aware that this small number of mutual companies exist which are not registered under the Industrial and Provident Societies Act. I hope that we shall be able to deal with them, if they come within the definitions, when we bring forward our proposals in this respect.
I hope that that will satisfy my hon. Friend. But if he has any further questions to ask, with the leave of the House I shall try to answer them.

§ Mr. Ridley
My hon. Friend's explanation does satisfy me. I beg to ask leave to withdraw the motion.