§ Mr. Silvesterasked the Chancellor of the Exchequer if he will list those provisions relating to company tax which allow a specific exclusion, exemption or deduction from gross income or which provide a special credit or a deferral of tax liability giving for each his estimate of the value of the concession.
§ Mr. Denzil Davies, pursuant to his reply [Official Report, 19th May 1977; Vol. 932, c. 277], gave the following information:
Specific provisions generally available to companies which provide for relief by deduction from gross income, credit against tax or deferral of tax liability are—
charges on income (S 248 ICTA 1970) trading etc. losses (S 177 ICTA 1970) group relief (S 258 ICTA 1970) management expenses (S 304 ICTA 1970) stock relief (S 37 FA 1976) capital allowances double taxation relief In calculating a company's profits for corporation tax a deduction is allowed in arriving at trading income for normal business expenditure such as purchases wages, rates and bank interest in the same way as such outgoings are allowable for income tax in the case of a sole trader or partnership. Charges on income such as debenture interest are allowed separately.
For tax purposes any capital allowances, stock relief and charges, as well as management expenses of financial companies which cannot be set against the profits of the accounting period concerned because those are too small to absorb them all, are treated as losses which can be carried forward or, in some cases, backwards, or surrendered as group relief to another company in the same group. As a result no separate estimates can be made of these costs.
517WFor stock relief, however, it is estimated that in 1976–77 the relief resulted in a reduction in the CT yield of £940 million. I regret that the corresponding figure for capital allowances is not available. It is estimated that the total amount due represents tax of £3,200 million, but this is not a meaningful estimate because, first, it assumes that the whole amount has been claimed and absorbed by profits, and, second, any system of computing charge-able profits would have to take account in some way of the wastage of capital incurred in earning those profits.
I regret that no recent estimates are available for doube taxation relief, partly as a result of the changes which have occurred in the overseas taxation of oil companies.