§ Sir H. Webbe
asked the Chancellor of the Exchequer to what extent the policy stated by his predecessors on 11th June, 1947, and 22nd July, 1948, in regard to the practice of the Special Commissioners in not issuing directions under Section 245 of the Income Tax Act, 1952, to companies which pursue a policy of dividend limitation, applies to companies formed since June, 1947.
§ Mr. H. Macmillan
Companies formed after 31st May, 1947 (and companies formed before but whose first accounting period ended after that date), are not within the statements to which my hon. Friend refers, because they had no period ending before June, 1947, the dividends for which are available for the purpose of the comparison with subsequent dividends which is implicit in those statements.
In practice, however, the spirit of the statements is observed in dealing with such companies. While the fact that they paid no dividend before 1947 does not give them a right to claim a nil standard dividend for this purpose, the opening years of the business are considered on their merits (having regard inter alia to the need to plough back profits for maintenance and development). If the Special Commissioners have accepted as reasonable a dividend payable after the business has become established they make no direction if that rate of dividend is maintained, without avoidance devices, in later years.