Schedule 11.—(Amendment of Corporation Tax Acts.)
Mrs. Margaret Thatcher (Finchley)
I beg to move Amendment No. 74, in page 70 line 35, to leave out paragraph 2.
J. DiamondThe Chief Secretary will remember that when I moved the Amendment in Committee I asked him to reconsider the inclusion of the paragraph in the Bill. I do not think that this is an occasion for me to rehearse the arguments I put forward then. I should be grateful if he could report to the House what he has decided about the Amendment, whether he will propose any changes in a forthcoming Finance Bill, and his conclusions about top slicing and the inconsistencies between last year's Act and his proposals in the Bill as they apply to pension and annuity funds.
Mr. Diamond
I cannot recommend the acceptance of the Amendment. I shall deal with it as simply as I can, but we now more from the absolutely clear and pellucid provisions of the Bill into matters which are somewhat complicated.
The background of the Amendment is that the Life Office's Association has been pressing for a larger allocation of franked income to shareholders, and the corollary is a smaller liability to Schedule F tax on the dividends paid than is the rule under the Bill. We are concerned here with proprietary life assurance companies who must pay out their profits partly to shareholders and partly to policy holders. The problem relates to the allocation of franked investment income. We take the view that in the absence of any guidance to the contrary, and as there is no logic in having anything other than [column 546]what we propose, the sensible way of dealing with the matter is to apportion franked investment income in the same way as the company apportions its profits as between those two groups.
That sounds good common sense. There is nothing against it, and that is what is in the Bill. The hon. Lady asked us to look at the matter again and I proposed to receive once more the representatives of the life assurance companies. I was glad to do so, and to hear their representations. But on that issue I am confirmed in the view which we previously held that this is the commonsense way of dealing with the matter. No view has been expressed by any Body—with a capital B—which recommended otherwise, and, therefore, it would be wrong to suggest that we should depart from our previous view.
The hon. Lady reminded me that she referred to certain inconsistencies, which I have also considered. I was the more easily able to consider them in cold print than in the words she used at the time. The inconsistencies have also been considered with the representatives of the association, as a result of which I wrote to its chairman. I shall not quote the whole letter, but perhaps I should repeat these words:
“… I understand that the Inland Revenue have decided that the provisions in the Finance Bill and in last year's Finance Act can be interpreted in a way which meets your difficulty.”
I thought that it was as well to put that on the record to show the hon. Lady that this is not an insuperable difficulty. The inconsistency arises out of a possible interpretation; that interpretation does not hold the day, and, therefore, there is no need for any alteration.
In those circumstances, I hope that the hon. Lady will feel that we have done the best we can by receiving a deputation, which corroborated what she said in Committee, and to pay full regard to it. Nevertheless, I hope that she will believe that the solution we propose in the Bill is perhaps the better one, and that in those circumstances a great deal would not be achieved by pressing the Amendment.
Mrs. Thatcher
There is clearly a very fundamental difference between us on this. As my right hon. Friend and I [column 547]will probably deal with it in three or four years' time, perhaps we had better leave it until then.
Mr. Deputy Speaker
Does the hon. Lady wish to withdraw the Amendment?
Mrs. Thatcher
No, Mr. Deputy Speaker.
Amendment negatived.