§ Companies have in general been doing rather better in the last year or two and profits last year reached a very high level. There was, in fact, a significant increase in the share of total national income going to companies. In these circumstances, it is only right that companies should bear their share of the cost of putting the economy back on course.
§ I propose, therefore, first, that the corporation tax rate for the financial year 1973 should be 52 per cent., a little above the rate of 50 per cent. which, I think, has been generally expected; and, secondly, that companies should be asked somewhat to accelerate the payment of a proportion of the corporation tax for the next year. This acceleration will work on the following lines. As from 1st April, when they pay their advance corporation tax on distributions, they will have to make an additional payment of a half of that sum. This extra amount will then be set off against their corporation tax liability on their profits for their accounting years ending in 1974–75. I propose that small companies shall be charged at a rate of 42 per cent. Building societies, co-operative societies and housing associations will remain chargeable at their present rate of 40 per cent.
§ I must deal here also with the rate of tax on gains accruing to companies. The law now provides for a fraction only of capital gains to be included in a company's taxable profits, so that the effective rate on gains is less than the rate applied to income. I propose that this effective rate for the financial year 1973 shall be 30 per cent. I propose also to 320 continue for the financial year 1973 the effective corporation tax rate of 15 per cent. on gains going to investment and unit trusts to match the credit given last year on gains made on a sale by unit-holders.