§ [The Question was as follows:
§ To ask Her Majesty's Government whether in the case of damages and/or costs awarded against a newspaper the sum paid is reckoned to be a business expense for the purpose of taxation; and whether an annual insurance premium against damages for libel is a business expense.]
§ THE MINISTER WITHOUT PORTFOLIO (THE EARL OF DUNDEE)My Lords, I am advised that, in general, damages for libel and costs awarded against a concern carrying on the business of publishing a newspaper would be deductible in computing the business profits for tax purposes. An annual insurance premium would likewise be deductible.
LORD HAWKEMy Lords, I thank my noble friend for his reply. Do Her Majesty's Government not think it is rather an unsatisfactory position that an erring newspaper can in this way pass off on to the general taxpayer more than one half of the penalties awarded against it?
§ THE EARL OF DUNDEEMy Lords, the noble Lord may perhaps be interested 74 to know that in the case of Fairrie v. Hall in 1947 the Court refused to allow damages and costs to be deductible for income tax purposes. This arose from a case in which a sugar broker had published malicious and defamatory statements about another sugar broker who was his business competitor. The Court held that the damages and costs were not a legitimate business expense. I understand it is very doubtful whether this ruling could be applied to any libellous statement published by a newspaper.
LORD HAWKEMy Lords, I thank the noble Lord for his supplementary information. Would Her Majesty's Government consider taking some action, either administratively or legislatively in the next Finance Act, to remedy what appears to the ordinary citizen a very curious position?
§ THE EARL OF DUNDEEMy Lords, I think it would perhaps be a little dangerous to alter the law in order to deal with particular cases of that kind.