§ Mr. Trotterasked the Chancellor of the Exchequer (1) in how many cases the provisions of Section 486 of the Income and Corporation Taxes Act 1970 have been applied in each of the last three years; and if he will give examples of the type of transaction against which the provisions of this section are directed;
(2) if he will repeal Section 486 of the Income Tax and Corporation Taxes Act 1970.
§ Dr. GilbertMy right hon. Friend does not propose to repeal Section 486. The section is aimed at avoidance devices operated within a group of companies and is based on the difference in the treatment for tax purposes of, on the one hand, a company which carries on a trade of dealing in securities, land or buildings and, on the other, an investment holding company or an ordinary trading company. For example, a "dealing" company which waives a loan it has made to an associated "non-dealing" company may get tax relief for the amount waived, but if it were not for Section 486 the "non-dealing" company would keep the money tax-free. As it is, it is liable to pay tax on the amount waived.
235WInformation regarding the number of assessments made under the section is not available. In any case, as with many such provisions it may largely serve its purpose by preventing tax-avoidance transactions from being carried out.