§ Sir J. D. REESasked the Chancellor of the Exchequer whether the members of a firm who pay Income Tax on their shares of profit on the lower earned-income scale and who turn their concern into a private company and create capital, so as to draw dividends equal to what they formerly drew as members of the firm, have to pay Income Tax on the unearned scale because they receive their share of profit as dividend; and, if so, whether he will consider the desirability of checking the creation in such circumstances of companies which provide revenue in the shape of stamps and transfers apart from other considerations?
§ Mr. McKENNAIn cases in which a firm converts itself into a limited company and the partners become shareholders, payments received by those shareholders in the shape not of emoluments but of dividends on their shares are subject to Income Tax at the rate applicable to unearned income equally with the dividend paid to any other shareholders.