STOCK RELIEF

HC Deb 17 July 1980 vol 988 cc1776-92 4.20 pm

Mr. Richard Page (Hertfordshire, South-West)

I beg to move amendment No. 178, in page 112, line 26, leave out from 'that' to end of line 28 and insert 'the amount of the charge shall be deferred to the next period of account'.

Mr. Speaker

With this we may take the following amendments: No. 179, in page 112, line 29, leave out from beginning to end of line 11 on page 113.

Government amendment No. 29.

No. 180, in page 112, line 29, leave out from 'is' to 'but' in line 31 and insert 'the charge under the said paragraph 2(1) or 10(1)'. No. 181, in page 112, line 31, leave out from 'charge' to end of line 38.

Government amendments Nos. 30 and 31.

No. 182, in page 112, line 39, leave out from beginning to end of line 11 on page 113.

Mr. Page

The amendments stand in my name and the names of my hon. Friends who are members of the Conservative small business committee.

I thank you for selecting the amendments for discussion, Mr. Speaker, because they give us an opportunity to discuss once more the question of stock relief and will enable us to secure clarification of what we were told in Standing Committee. It was made clear there that the deferral system is designed to accommodate temporary dips in stock at the year end and not destocking. I regret that I feel that the whole concept does not go far enough in helping companies with their liquidity problems. Most of our companies are placed in a nutcracker. On one side they want to reduce their stocks, improve their liquidity and reduce their various interest charges. On the other side, if they do so, they lose stock relief and become liable for corporation tax.

Whether the relief is for destocking or temporary dips, a lot of confusion has been caused by the statement by my right hon. and learned Friend the Chancellor in the Budget when he announced the deferral proposal for companies, saying that he was doing it because he was concerned about the recovery charges which they will face as a result of reductions in stock levels likely to arise either because of the general pressure on liquidity, or in some cases as a result of the steel strike."—(Official Report, 26 March 1980; Vol. 980, c. 1467–8.] The amendments are aimed at trying to ease the liquidity problems. The first of them seeks to reduce the 5 per cent. restriction on initial stock from any deferral allowance. I am well aware of the arguments that the 5 per cent. will remove the borderline cases, with all the paperwork that is involved, and that it will enable the money that is available to be concentrated where the help is most needed. But any company that has managed to hold its stock level over the last year has already achieved a reduction in real terms of about 15 to 20 per cent. The additional 5 per cent. will hit at its liquidity even harder.

Perhaps I may draw a parallel for my hon. Friend the Financial Secretary that he may find familiar. Excess public expenditure over revenue and the resulting inflation are to the economy rather like a drug to an addict, and to kick the habit will be an extremely painful and difficult experience. I do not lay the cause of inflation at the door of our companies and smaller businesses. It should be laid, more rightly, at the door of the Labour Government. In kicking the habit this area of industry deserved more help and greater relief since it is an important contributor to the gross national product.

I do not wish to appear ungrateful on this matter. In view of the presence on the Notice Paper of Government amendment No. 29 I shall not take the time of the House in dealing with any of my amendments on net indebtedness. I welcome the Goverment amendment because it will be of considerable advantage to smaller businesses, and in putting it forward the Government have recognised and responded to the difficulties that the prevous proposals would have caused for them. It will also remove any suggestion of a relative advantage for the larger companies as opposed to the smaller companies. The larger company of a vertically integrated nature can, I am sure, handle this whole question of net indebtedness far better than the smaller business. I do not propose to labour the point, but simply express my appreciation and welcome for the Government's action in this respect.

The last of my amendments deals with companies experiencing stock drop over two years. Current conditions demand an immediate repayment of the deferral allowance and the loss of stock relief immediately at the end of the second year. I cannot see why the Government cannot provide that at the end of the second year a company, while having to pay the amount of its deferral for the first year, could be allowed in turn a deferral for the second year in respect of the amount of stock drop. I appreciate that my hon. Friend has to be careful over the money that he spends. However, any company that experiences stock drop over two years will, when it recovers, simply get all the money back under the stock relief proposals. These provisions could mean unnecessary paperwork and the unnecessary shunting around of money. It will cause companies liquidity problems, probably when they most need that liquidity. If a company were then to close down, the money from any stock relief or allowances would automatically revert to the Government.

To be fair, I can see why, at the moment, my hon. Friend feels that he must not play his card of extending deferral into the second year. Equally, I am sure that he can see why I believe that companies would be able to plan much better if they could anticipate a second-year deferral. I hope that my hon. Friend will not slam the door this afternoon, but will leave it and his options open for next year, when he may wish to take the opportunity for a further deferral.

I am seeking change over and above what has been proposed by the Government. It would be churlish of me and my colleagues on the small business committee not to express our extreme appreciation of what the Government have done in respect of temporary dips, particularly amendment No. 29, which will be particularly helpful to smaller businesses.

Mr. Tam Dalyell (West Lothian)

We all know from our constituency experience that many small businesses face a very serious problem. In many cases it is of a temporary nature, but it is no less serious for that. Given that there are liquidity and cash flow problems, one wonders whether the amendment moved by the hon. Member for Hertfordshire, South-West (Mr. Page) is the way to deal with such problems. Is stock relief the tool to use? I wonder whether the issue is more related to bank lending. I have not read it yet in detail—these are matters for the recess—but there is a finding in the Wilson committee report. It concluded that the banking system has become significantly more competitive since 1971 and does not believe that the clearing banks have abused their market power. In the first instance, should not the banks deal with those problems rather than introducing this sort of amendment to the Bill? If the amendment is accepted, what will be the price tag?

4.30 pm

Mr. John Loveridge (Upminster)

I rise briefly to support the remarks of my hon. Friend the Member for Hertfordshire, South-West (Mr. Page). He has done the House a service by bringing forward the amendment. I am grateful to the Government for responding, in part, on the question of stock relief recovery deferment. At a time when there are forecasts of de-stocking in industry amounting to £1½ billion in the current year, it is obvious that stock relief is a serious matter for many businesses whose liquidity may be deeply affected. If firms are not liquid, they cannot invest or employ more workers. Unemployment is a critical factor in the economy.

I hope that the Government will heed my hon. Friend's remarks about next year and think deeply before rejecting any hope for an extension of the relief, which should be over a period of two years. I ask them to reconsider the matter next year. In the meantime, the small business community is grateful for the complex relief given by the Government, although, by itself, it is not enough.

Mr. Allan Stewart (Renfrewshire, East)

I rise briefly to emphasise the importance of amendment No. 179, introduced by my hon. Friend the Member for Hertfordshire, South-West (Mr. Page). There was considerable debate in Committee about the proposal that the restriction on deferment should be by reference to net indebtedness. Both sides of the Committee, including the Opposition Front Bench, expressed concern about the matter. There was evidence of concern from a number of professional institutes and other bodies that were extremely worried about that point.

I do not want to talk about the point of principle, although it is fair to say that the concept of net indebtedness introduces a new feature into the stock relief system because it is not directly relevant in calculating either relief or clawback. Many people, both in the accountancy world and in industry, feel that there will be serious difficulties for companies arising from the introduction of the new concept because of the administrative burdens of sorting out difficult points in accountancy practice. My hon. Friend the Member for Hertfordshire, South-West welcomed Government amendment No. 29, which is desirable. It reinforces the case for dropping the net indebtedness restriction because it concedes that the restriction is inoperable except when considerable resources are expended.

I do not know whether, at this late stage, it is possible for the Government to consider accepting amendment No. 179. I emphasise that there remains considerable concern about the impact on companies of continuing the net indebtedness restriction.

The Financial Secretary to the Treasury (Mr. Nigel Lawson)

Amendments Nos. 178 to 182, in the names of my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) and others of my hon. Friends, are identical, word for word, with the five amendments on this point that we debated at considerable length in Committee. They are none the worse for that. I was unable to reply in Committee because I was in Luxembourg, at a Budget Council. I have read the reply given by my hon. and learned Friend the Minister in Hansard, in columns 506–512. That reply was impeccable. I do not wish to make a single embellishment to it.

We looked hard at the two main points made, namely, confining relief to a single year and the problems alleged to arise from the trade credit restrictions. On the former point, we do not see our way to extending the time beyond one year. It is essentially a temporary dips scheme. But I assure my hon. Friends that that is not our last word. In his Budget Statement my right hon. and learned Friend the Chancellor of the Exchequer said that there would be consultations on various aspects of the stock relief scheme in time for legislation in the next Finance Bill. A Green Paper on corporate taxation will be published before the end of the year, and stock relief is an important aspect of corporate taxation. There will be full discussions on the Green Paper to pave the way for legislation next year. There are many aspects of company taxation that are unsatisfactory. It is clearly time for a full consideration of the matter.

This year we have been able to introduce improvements in the stock relief scheme. They are embodied in Government amendments Nos. 29, 30 and 31. The hon. Member for West Lothian (Mr. Dalyell) asked about the cost. Before answering that point, I wish to say that I am grateful for the approval of my hon. Friends for what we have done already. I recognise that they wanted us to go further, but they recognise that we have gone a long way. The original stock relief proposals would have cost £210 million this year and £125 million next year. Improving the scheme in the way that I shall explain later will add a further £25 million this year and a further £15 million next year. About £¼ billion of relief will be given this year.

The amendments will increase the amount originally provided in the Bill by £40 million over this year and next year combined. That is not a negligible amount. We cannot see any cause to resile from the principle of a credit restriction in the temporary dips scheme. We accept that the calculation of the present restriction is not always an easy, straightforward or simple matter, as my hon. Friend the Member for Renfrew-shire, East (Mr. Stewart) pointed out. We thought it sensible to confine it to cases where the recovery charges were largest and where substantial amounts of tax were at stake. The restrictions should apply only to those cases where the recovery charge exceeds £100,000, and then only to the excess over £100,000.

In simple terms, the effect will be to exclude virtually all unincorporated businesses from the scope of the credit restriction. We estimate that it will reduce the number of companies likely to be affected from about 30,000 to 40,000 to only 1,000. Those companies will be fully able to cope with this innovation—and I accept that it is an innovation. It should bring worthwhile savings for businesses and their advisers, while concentrating the restriction on the largest cases that really matter.

The concessions go a long way towards meeting the concern expressed by several of my hon. Friends in Committee about the administrative problems of applying the credit restriction. I hope that the amendments will be approved and welcomed on all sides of the House.

Mr. Dalyell

The Minister referred to the Green Paper. I hope that the Green Paper will be discussed well outside the Finance Bill. We are in some difficulty, because fundamental questions about charities should not be mixed up with the Finance Bill. Equally, this ought to be discussed outside the framework of any particular year's Finance Bill, and I hope that the Minister puts that point to the Leader of the House.

Amendment negatived.

Amendments made: No. 29, in page 112, line 29, leave out from beginning to 'at' in line 31 and insert— `(1A) Subject to sub-paragraph (2) below, the amount of a charge eligible for deferment is so much of it as exceeds 5 per cent. of the opening stock value in the period of charge. (2) Where the amount that would be eligible for deferment under sub-paragraph (1A) above exceeds £100,000 and'.

No. 30, in page 112, line 33, leave out 'charge' and insert 'excess'.

No. 31, in page 112, line 36, leave out 'charge' and insert 'excess'.—[Mr. Lawson.]

Mr. Lawson

I beg to move amendment No. 32, in page 113, line 11, at end insert— '(4A) For the purposes of sub-paragraph (4) above there shall be left out of account—

1. (a) any amounts owed to the person in question which are allowable as deductions in respect of bad or doubtful debts in computing his profits or gains for the purposes of Case I of Schedule D; and
2. (b) any amounts of value added tax owed by him to the Commissioners of Customs and Excise or by those Commissioners to him.'

This amendment makes two fairly minor but significant changes to the definition of a business's net indebtedness, which will affect the credit restriction that we discussed in our previous debate. It deals with bad or doubtful debts, on the one hand, and the treatment of VAT, on the other. I shall be happy to answer any questions which may be put to me.

Amendment agreed to.

Mr. Lawson

I beg to move amendment No. 33, in page 113, line 12, after '(5)', insert 'Subject to sub-paragraph (6) below,'.

Mr. Deputy Speaker (Mr. Bryant God-man Irvine)

With this we may discuss the following amendments: No. 158, in page 113, line 19, leave out 'or shorter than twelve months' and insert 'than twelve months and seven days or shorter than twelve months less seven days'. No. 190, in page 113, line 19, after 'months', insert 'except where it is shown that the relevant period of account was longer or shorter than 12 months for bona fide commercial reasons and not for the purposes of obtaining a deferment under this Schedule'. No. 159, in page 113, line 20, leave out 'or of the preceding'.

No. 160, in page 113, line 22, after first 'or', insert 'substantial'.

No. 191, in page 113, line 25, after 'months', insert 'except that where it is shown that any such transfer or change as is mentioned under (i) or (ii) above was made for bona fide commercial reasons and not for the purposes of obtaining a deferment under this Schedule then this restriction shall not apply'. Government amendment No. 34.

No. 183, in page 113, line 26, at end insert— '(d) paragraph (a) above shall not apply where the period of charge is the earliest period of account which ends on or after the financial year 1979 (in the case of a company) or the year 1979–80 (in other cases)'.

Mr. Lawson

Government amendments Nos. 33 and 34 are designed to meet commitments that were given in Committee. During the Committee debate my hon. Friend the Member for Croydon, South (Sir W. Clark), whom I am glad to see, as ever, in his place, asked us to consider whether anything could be done to help businesses to obtain the benefit of the deferral provisions where they changed the length of their accounting period for bona fide commercial reasons. As was recognised in Committee, the existing rules are designed to stop businesses manipulating the length of their accounting periods in order to gain an unjustified benefit from the deferment.

However, in pressing me to look again at the matter, I quite understand that my hon. Friend was not seeking to make it any easier for businesses to undertake that form of manipulation. He suggested that some kind of test should be built into the provisions which would allow deferral where accounting periods were changed for bona fide commercial reasons. That seemed to my hon. and learned Friend the Minister of State—and I agree with him—to imply some type of motive test, with the possibility of clearance procedures and all the rest. As my hon. and learned Friend indicated, that would be a complicated, elaborate and top-heavy provision.

What we have come up with—I hope that my hon. Friend will accept it—is, in effect, a kind of half-way house provision. We have said that a motive test would not be appropriate and that, for reasons of manipulation, we cannot remove the rule altogether. However, we feel that changes in accounting periods made during 1979–80 clearly cannot have been planned with the temporary dips scheme in mind, because that did not exist then. In the circumstances, it seems right to modify the rule for that year, and that is what the amendments seek to do.

4.45 pm

As a result, recovery charges arising for periods of account ending in 1979–80 will be deferrable in the usual way, notwithstanding that the period of account may have run for longer or shorter than the normal 12 months. Of course, the normal rules will apply to the following periods of account. I hope that my hon. Friend will accept that with this half-way house provision we have gone as far as we can to meet the point that he made.

Mr. Eric Deakins (Waltham Forest)

Amendments Nos. 158, 159 and 160 stand in my name. I think that amendment No. 158 has a bearing on the Government amendment, although I do not believe that the Government amendment quite meets the point that I put to the Chancellor of the Exchequer in a letter. I look forward with interest to hearing the Minister's reply.

It is a fact of life that a number of public companies have always ended their financial year on either the last Saturday in April or the first Saturday in May, thus giving them either 52-week or 53-week financial years. This is a common practice in the food trade, where, for many companies, a Saturday stock take is the only practicable solution. One appreciates the necessity for having legislation that affords protection against any attempt to gain tax benefits by end-year manipulation, but I do not believe that it is the intention of the Chancellor or the Treasury to penalise legitimate public companies that have a long-established basis of 52-week or 53-week financial years.

Such companies would not be able to claim the benefits of schedule 7. That is wrong. I should have thought that that was not the Government's intention in introducing this part of the Bill. For some purposes—for example, for corporation tax—the Inland Revenue, by concession, treats such companies as though their period of account was, in fact, 12 months. However, that is unlikely to be a solution to this problem in regard to schedule 7, because I do not think that the Inland Revenue could deal by concession with the current position, as to do so would clearly be against the wording of the legislation. An amendment is therefore necessary.

I turn to amendment No. 159. The Government's intention is that companies that are suffering temporary liquidity problems should be able to obtain some relief from the taxation consequences resulting from the fall in stock value. However, where part of a business has been disposed of in the preceding period for which relief is sought, in most cases the company will have suffered claw-back in that preceeding period, and will obviously have to be prevented from claiming schedule 7 relief by virtue of paragraph 1(5)(a). Where the company did not suffer clawback, because, despite the disposal of part of its businesses, its stock increased during the year, there would seem to be no reason why it should be prevented from claiming schedule 7 relief in respect of the current period.

I now turn to amendment No. 160, which applies to a number of companies in which I have worked and with which I have been associated. Many public companies are divisionalised within one trading company. Therefore, the disposal of part of their business would, under the legislation as drafted, prevent an election for deferral of stock relief claw-back where only a small part of the business had been disposed of in the current period. Surely it cannot be the intention of the Government to deny the proposed relief to the rest of the mainstream business of a company where an insubstantial part of the business has been disposed of during the current period of charge. Amendment No. 160 therefore proposes to qualify the restriction of this relief to those companies where there has been a disposal of a substantial part of the business during the current period. I think that that must have been the Government's intention.

Mr. Richard Wainwright (Colne Valley)

I wish to refer particularly to amendments Nos. 190 and 191, which stand in the names of Liberal Members. Amendment No. 190 is intended to inject some reason and sense into the question of companies which change their year end.

It will be within the experience of almost all hon. Members that many companies, for entirely bona fide reasons and for the furtherance of their trading purposes, have occasion to change their yearend. In my own practising experience, the classic case comes with the best type of new or small business, namely, the one which is growing fast. At the beginning, it probably clutches a year-end date out of the air, or it may take the date on which the shop door was first opened. But when the business becomes sizeable, other considerations apply. There may be several reasons then for changing the year-end date, such as staffing, with the problems of a Saturday stocktake, or because of the nature of the trade and the desire not to have the year-end when the warehouses are absolutely full and stocktaking is exceptionally burdensome. For all these reasons, and many others with which I shall not burden the House, companies are in the habit of changing their year-end.

It is very odd indeed that a Government who only 15 months ago were proclaiming the gospel of not interfering with industry, and were removing bureaucratic shackles from enterprising people, should now insist that a change of year-end, for no matter how splendid a purpose, immediately disqualifies a business from relief.

Mr. Deakins

Does the hon. Gentleman agree that the position is even worse than that, with respect, because the Government are not merely trying to penalise companies that change their year-end for some reason or other; they also intend to penalise any company that does not have literally a 12-months-to-the-day accounting year.

Mr. Wainwright

So it would seem, although I had been disposed to credit the Inland Revenue with a rather more tolerant attitude than the hon. Gentleman attributes to it. He probably has the very best of reasons for taking a gloomy view. I am inclined to accept his view, which reinforces what I was trying to say.

It is very odd indeed that companies should be denied reasonable commercial elasticity by a Government who were proclaiming that very principle on their banners only very recently. It is rather sad, so early in ministerial careers that began with so much gloss and promise, to find the shades of the prison house of the Inland Revenue closing in upon them and Ministers surrendering weakly to the worst of bureaucratic motives. That is certainly what is happening in this case.

As every hon. Member knows by now, it all arises from the extraordinarily crazy nature of the whole stock relief arrangement from its inception in 1974. As mentioned just now, sums of the order of £500 million of tax revenue a year are left to depend on one annual stocktaking. Naturally, many people dealing in commodities where stocking and destocking can be fairly rapidly achieved inflate their stocks at the year-end. They do so entirely within a law which was very ill-drawn.

I have never been able to understand why companies over a certain size, claiming stock relief over a certain amount, were not required to produce stock figures at least twice in the year, if not four times. It would be a small price to have to pay for the immense amount of tax relief that has been obtained, much of it, without a doubt, on inflated stock figures. But since that is the highly simplistic banana-republic type of law that we have to accept as being on the statute book, it is adding to the offence now to prevent companies from making a reasonable adjustment of their trading period.

The motive test has been applied in Finance Acts almost annually, in an increasing form, over the years. The Financial Secretary says that in this case it would be unduly complicated and top-heavy, but the matter seems not to have been thought out at all, and to be part of the present extraordinary fashion to deprive the citizen of equity in taxation simply for the sake of saving a few Inland Revenue clerks.

I cannot understand why it should be regarded as unduly complicated to apply a motive test to a change of year-end the reasons for which are relatively simple to establish and are matters of fact. Instead, we have this draconian clause, and the Financial Secretary has gone not halfway but only a fraction of the way towards meeting a civilised demand. Simply to defer the operation of this primitive rule for a year or so cannot be said to be meeting commercial demands halfway.

The amendment to which I am speaking would simply allow a company a chance to argue its case that it had changed its trading period for bona fide commercial reasons. If it could establish that to the satisfaction of the Inland Revenue it would be able to defer the claw-back, just as other taxpayers can.

My other amendment refers to the restriction on deferment of clawback if the business changes hands. Here again, it is of prime importance that there should be a motive test. Clearly, there could be dealing—indeed, I have no doubt that in other ways there is dealing—in stock relief entitlements between companies, just as there has always been massive dealing in tax losses in companies. It is entirely within the law. I appreciate that there has to be some precautionary part of the legislation, but it is entirely wrong and contrary to natural justice to deny the trader an opportunity of showing that the trade has changed hands for entirely bona fide commercial reasons, as happens every day of the week.

For the reasons that I have given, I think that the Bill as it stands is defective, and I hope that we shall have something rather more forthcoming next time from the Financial Secretary.

Sir William Clark (Croydon, South)

The Minister was kind enough to say that when I spoke in Committee it was no part of my submission that there should be any manipulation for the deferment of taxation, or for the purposes of evasion, or anything like that. But, as the hon. Member for Colne Valley (Mr. Wainwright) said, the amendment that we discussed in Committee was purely to cover bona fide commercial transactions.

I am most grateful to the Minister. I realise the difficulties of the Inland Revenue in giving an exemption where bona fide reasons exist. I am also grateful that for the current year the rule will not apply. If evidence can be given to my hon. Friend during the current year showing that the clause is operating to the detriment of bona fide changes in accounting date I am sure that he will agree that we can have another look at it in the autumn.

I agree with what has just been said about stock relief. It is getting into an awful muddle. It is creating many anomalies in our tax system. It is interesting to remember that it costs the Exchequer about £1,300 million a year. If that sum were allocated to the reduction of corporation tax generally, both rates could come down by 10 points. When we are discussing corporate tax in the Green Paper we ought to look at this.

We are most grateful to my hon. Friend for the half-way house that he has given us. In the circumstances, it is probably the best that we could expect. In saying that, I hope that this will not be the last of the concessions that the Government will make today.

The question whether there should be 52 weeks or 52 weeks and three days for stocktaking purposes gives rise to a genuine difficulty, and I should have thought that it could easily be met by a concession on the part of the Inland Revenue.

5 pm

Mr. Dalyell

I wish to sing a rather different song from that sung by the hon. Member for Colne Valley (Mr. Wainwright). Ministers certainly do not need me to defend their actions. I suspect that there is an explanation for what the hon. Gentleman said. On the surface, it might look an odd thing for a Conservative Government, or any Government, to do, but the truth is that they have to do this on not the insistence but the plea of the Inland Revenue, because of the—I shall not say fraud; I had better choose my words carefully—avoidance complications.

By this deferment—this kind of manipulation, to which Treasury Ministers have referred—a good deal of money—I shall not say a great deal of money, because I do not want to over-egg the pudding or exaggerate the case—is involved Heaven knows, both on Second Reading and in Committee upstairs I had enough to say about the black economy and tax frauds. But I put the direct question: is not the reason for taking this view to do with tax avoidance? If it is not tax avoidance, I am baffled to know why the Government have included this provision.

I agree with the hon. Member for Croydon, South (Sir W. Clark) that those who have served on a number of Finance Bill Committees are getting more and more bewildered about the stock relief complications and the vast amount of money that is now being put into stock relief. The hon. Member for Colne Valley said that if we are to have this kind of stock relief built into the taxation system we had better have more stock checks than at present. Yet that, in turn, involves extra work, and that will not be popular in industry and commerce with the problems that they have at present.

Surely the time has come for a rethink of the whole issue of stock relief and whether it is the best way for public money to be spent for purposes that may look good on the surface but may be better served by other forms of tax relief or direct grant if money is available from the Treasury. Inevitably, I have been questioned about price tags—a subject that is all too familiar to Ministers.

Mr. Lawson

I was astonished to hear the hon. Member for Colne Valley (Mr. Wainwright) describe this clause as draconian. This draconian clause, as he described it, gives relief of about £¼ billion to companies this year. If that is his definition of a draconian clause, it is not mine.

A number of specific points have been made in this short debate. I reassure the hon. Member for Waltham Forest (Mr. Deakins) that my hon. Friend the Member for Croydon, South (Sir W. Clark), who adverted to his amendment, is absolutely right. For tax purposes, the Inland Revenue already accepts accounts which do not fall on exactly the same date each year as being 12 months accounts made up to a mean date. That means that in one year or another they may vary about that mean date. I understand that a variation of about four days is allowed. The adoption of this practice is subject to the written agreement of the taxpayer. In cases where it operates, the accounts are regarded as being for 12 months and will be treated as such for the purposes of this dips scheme. This is covered fully by the existing practice.

The other points made by the hon. Gentleman, as the hon. Member for West Lothian (Mr. Dalyell) indicated, could give rise to complex forms of tax avoidance. I have examples of how they work with company A, company B and company C, but I shall not at this stage, unless he positively insists upon it, weary the House by reading out how these things work. I must say that until I read this I did not understand it, but I think that I do now. Anyway, complicated schemes could be devised if the clause were not drawn as it now is.

Mr. Dalyell

I do not ask the Financial Secretary to read it to the House but if he has the information available, will he send it to some of us in letter form, so we may peruse it?

Mr. Lawson

If the hon. Gentleman writes to me on a specific point, I shall certainly reply fully to him on it. I think that a general letter on forms of avoidance would not be sensible.

The points which have been made have been met halfway by covering 1979–80. We have met as far as we can the points made in Committee by my hon. Friend the Member for Croydon, South and by the hon. Member for Colne Valley. The hon. Gentleman complained about the complexity of legislation. The introduction of a motive test, clearance procedure and all this rigmarole would complicate matters even more and would be wholly unjustified in a relief of this kind.

I agree—this lay at the back of what the hon. Member for Colne Valley and others said—that the whole stock relief system is profoundly unsatisfactory. That is why we shall be putting forward proposals and having a Green Paper on corporate taxation, and possibly other consultative documents on the specific question of stock relief, with a view to putting everything on a more sensible basis. Clearly a radical solution is needed to deal with the problems created by the clawback arrangements. We are looking at this matter carefully in our review of the system. The Government are not pretending that the dips scheme is in any sense a permanent solution to the problems of clawback. Of course it is not. But we hope that it will be of considerable relief at present. Meanwhile, we are considering what can be done in the longer term to solve these problems by other and more effective means.

Amendment agreed to.

Amendment made: No. 34, in page 113, line 25, at end insert— '(6) Sub-paragraph (5)(b) above applies only where the period of charge or the next period of account ends in or after the financial year 1980 (in the case of a company) or the year 1980–81 (in other cases).'.—[Mr. Lawson.]