SECURITIES BOUGHT WITH BORROWED MONEY (Hansard, 17 July 1975)

§ Mr. Denzil Davies

I beg to move Amendment No. 66, in page 29, line 44, at end insert— 'and with the addition, at the end, of the following proviso— Provided that subsection (2) above shall not by virtue of this subsection apply—

(a) in the case of a debt or liability incurred by a close company in connection with the acquisition by it of any securities, or an interest in any securities, if the proceeds accruing to the company from the redemption of the securities, or from a disposal of them or of the interest in them, are treated as a receipt of its trade; or
(b) in the case of a debt or liability incurred by a close company in connection with the acquisition by it of Treasury Bills".'.

This is an amendment to what is now Clause 40, which we discussed briefly in Committee upstairs. It relates to close trading companies where the companies borrow large sums of money, setting off the interest against other income, and thereby are able to make capital gains on securities.

I undertook in Committee to put down an amendment in response to an Opposition amendment to clarify the position in relation to close trading companies 1885 which merely dealt in securities in the normal course of their trade and were not involved in this kind of avoidance exercise. The amendment ensures that companies which deal in securities are not covered by the clause because they are not, of course, engaged in the kind of tax avoidance that the clause in intended to cover. It also clarifies the position concerning Treasury bills. There was debate about whether they should be included in the definition of "securities". The amendment meets that point. It covers Treasury bills. It fulfils the undertaking I gave in Committee.