§ Mr. Spensasked the Chancellor of the Exchequer whether he is aware that all moneys held at a bank by a trading concern are treated as capital employed in the business for the purposes of Excess 1513W Profits Tax; and will he inquire whether the flow of funds into National War Bonds is restricted by this arrangement?
§ Sir K. WoodNo, Sir. Rule 3 of Part II of the Seventh Schedule of the Finance (No. 2) Act, 1939, provides that arty moneys not required for the purposes of the trade or business are to be left out of account in computing capital for the purposes of the Excess Profits Tax. The fact that money may be held on current account does not in itself establish that it is employed in the business, and in any case in which it appears that bank balances are higher than is necessary in the light of the requirements of the business it will be the duty of the assessing authorities to exclude the excess from the computation of capital. It follows, therefore, that the proprietors of a business liable to Excess Profits Tax must expect no advantage to accrue to them for Excess Profits Tax if they leave uninvested moneys which in fact are available for investment. On the other hand they will lose the return on the investment which they might have made. This being so, I am confident that the flow of funds into National War Bonds will not be restricted by the consideration which my hon. Friend had in mind.