Mrs. Margaret Thatcher (Finchley)
I beg to move Amendment No. 64, in page 71, line 36, to leave out sub-paragraph (1) and to insert:
(1) The limit on the rate of corporation tax imposed by section 69(6) of the Finance Act 1965 as it applies to chargeable gains shall be 37½ per cent. or such percentage as is represented by a rate equivalent to one-half of the [column 347]standard rate of income tax for the time being chargeable whichever is the lower.
Now that we have embarked on the period of concessions which J. Diamondthe Chief Secretary indicated were ahead, I have great hope that his soft words will not only be saved for my hon. Friend the Member for Shipley (Mr. Hirst), but that he might just have a few left for me on this Amendment.
The Amendment concerns the rate of Capital Gains Tax charged on the funds of life assurance companies. By the Bill the Government have agreed to bring down the present rate to the maximum individual rate of 30 per cent. I understand that this is to bring life assurance funds into line with the rate charged on investment trusts, and it arises from a famous victory which we had on last year's Finance Bill.
My point is that the rate has not been brought down far enough, because the funds due to policy holders are a case which warrants special consideration. I shall try briefly to make out that special case which rests on the principle of looking through the funds to the policy holders beyond.
The looking-through principle is already very familiar in Revenue law. It is on this basis that charities are exempt from Income Tax and it is also on this basis that companies could be directed to Surtax. Therefore, the principle of looking through the company or organisation to those beyond is already applied either to relieve the beneficiaries from tax or to impose a greater tax upon them. We know the principle well.
If one starts to look through the life funds which are due to policy holders—I emphasise that it is only that part of the life fund which is due to policy holders that we are considering—one comes to the following conclusion. Many people are policy holders today who would not pay the maximum individual rate of Capital Gains Tax if they put their savings into ordinary shares themselves. This is because their gains would be below the £5,000 a year limit and, therefore, they would opt to have the alternative basis of assessment and the chances are that they would pay Capital Gains Tax at a very much lower rate than the maximum of 30 per cent. [column 348]
This applies to the majority of policy holders. It is true that there will be one or two who will make gains of as much as £5,000 a year, though I doubt it yet. In due time, of course, there will be. The vast majority, on the other hand, are quite ordinary folk who have taken out policies and who would pay at a low rate.
I cannot say what is the average rate which would be payable by policy holders. No one could possibly do that. But some statistics about the number of policies held at present might be useful. At the end of 1964, there were in force about 10½ million ordinary policies with an average sum assured, including declared bonuses, of about £1,200 each. These are comparatively small policies, therefore. For new policies effected in 1964, the average sum was about £2,200. At the same date, the end of December, 1964, there were about 110 million industrial assurance policies, with an average sum assured for existing business of £45 and for new business of £90.
Clearly, there is some duplication here, and the life offices have some indication of it. They believe that 70 per cent. of the population have some form of life assurance and, therefore, that, on average, a policy holder is likely to have three policies. But the sums assured are, comparatively, so small that this would not mean that policy holders were anything like wealthy people.
I hope that I have said enough about the great number of policies in existence to show that the majority of people holding them must be quite ordinary folk. It is on this ground that one makes the case for reducing the rate of Capital Gains Tax on the funds which belong to those people. If one accepts that, one must agree that the rates should come down.
The rate we propose is a rate equal to one-half of the standard rate of Income Tax for the time being chargeable. This rate, of course, has a historic reason behind it. It was the rate which the Inland Revenue itself proposed should be chargeable on life funds in a memorandum it submitted to the Royal Commission in 1925. I hope, therefore, that I should have some support from the Inland Revenue even if I do not get much from the Chief Secretary. However, [column 349]having made the broad assertion that the tax should be less on these people, I hope that the right hon. Gentleman will give us hope that the level of tax will be reduced.
In reply to a slightly different Amendment last year, the right hon. Gentleman said that it could not be alleged that savings through life offices should be preferred to other forms of saving. I cannot wholly agree with him there. It seems to me that this is one of the most beneficial forms of saving. It is the only form which enables a man both to save and to provide at the same time against sudden tragedy.
I believe that every married man should provide a good deal of life cover in the event of sudden death so that his wife and family are not bereft of husband and father and livelihood at one and the same time. On these grounds, therefore, there are strong reasons, quite apart from the looking-through reasons, for giving some tax incentive to this form of saving by way of reduction in the Capital Gains Tax charge.
I hope that I have made the point clear to the Chief Secretary and that he is in one of his more benign and generous moods. I look forward to hearing him make a hopeful reply.
The function of the Chief Secretary is to help the Committee. I am not sure that he is paid to be generous, benign and all the other things that the hon. Lady the Member for Finchley (Mrs. Thatcher) suggested I should be.
The hon. Lady described the purpose of the Amendment with complete clarity. She suggests that life policies, under the general principle of life assurance, should be encouraged. Life assurance is, of course, encouraged. There is considerable relief given to everyone who pays life assurance premiums. But the question here is quite simple. The hon. Lady referred to the true situation at the beginning of her speech, when she reminded us of the occasion on which the [column 350]Committee decided that 30 per cent. should be the appropriate rate of tax for unit and investment trusts. In his Budget speech this year, my right hon. Friend referred to this and said:
“I have decided to bring life assurance companies into line with unit trusts and investment trusts.” —[Official Report, 3rd May, 1966; Vol. 728, c. 1433.]
That is the simple reason why we are bringing them in. We think that they are analogous. We think that they are in competition. We are sure that there would be a considerable scream and quite proper objection from the unit and investment trust managers if funds were encouraged away from them into life assurance companies. Because they are competitors, because their situation is analogous, and because the Government favour saving of all kinds, as we keep on saying, we are anxious to treat them equally and to give them the beneficial rate which, as the hon. Lady knows, we have not sought to remove. The rate was decided in what one might, perhaps, without heat, call unusual circumstances.
The Government have not sought to alter it. They are merely bringing life assurance into line. There is, therefore, every justification for the 30 per cent. rate. I can see no argument for treating this particular category with exceptional and unfair generosity as compared with other equivalent forms of saving.
I am very disappointed with the right hon. Gentleman's reply, but I am not surprised at it. He has rejected the whole basis of the case and the looking-through principle which I put to him. I disagree that unit or investment trust managers would be dismayed if he were to accept the Amendment.
The quickest and the most impressive way by which we can make our opinion felt is in the Division Lobby. I hope that my right hon. and hon. Friends will join me in supporting the Amendment.
Question put, That the words proposed to be left out stand part of the Clause:—
The Committee divided: Ayes 232, Noes 159.[column 353]
I beg to move Amendment No. 12, in page 72, line 41, at the end to insert:
Transitional relief for companies paying dividends out of pre-1966–67 profits
In section 85 of the Finance Act 1965 there shall be added the following subsection—
(2) (A) In the case of a company which carries on, whether alone or in conjunction with some other trade or business, a life assurance business or other long-term business as defined in section 33 of the Insurance Companies Act 1958 but including sinking fund and capital redemption insurance business (hereinafter collectively referred to as “long-term business” ) and has made or makes a valuation of its liabilities in respect of such business or businesses for the purpose of making a distribution of profits, and the company was liable to income tax and profits tax and not to corporation tax upon some or all of the profits allocated to its shareholders out of the surplus resulting from such valuation, then the amount ( “the valuation period surplus” ) shall be calculated in respect of each year prior to the year 1966–67 in which such profits arose so that income tax on it at the standard rates for the said years may represent according to the rules prescribed by this section the proportion referable to the [column 354]company's income arising in each such year which is subject to income tax and profits tax of the extra charge to those taxes as compared with a charge to corporation tax but so that the valuation period surplus shall not exceed the amount on which repayments of income tax under this section would equal the income tax paid by the company on distributions made by it in the period up to the next normal valuation date out of profits which were liable to income tax and profits tax as aforesaid less any distributions that have been made there-out to the shareholders prior to the 6th day of April 1966.
The notional surplus in respect of such a company shall be the aggregate of the following—
(i) whichever is the greater of the one year surplus, the three year surplus or the valuation period surplus in respect of its long-term business; and
(ii) the notional surplus, determined according to the provisions of subsection (2) hereof, which that company would have had had it not carried on long-term business.
[column 355]In respect of a company to which this subsection applies the limitations to distributions provided for in subsection I hereof shall not apply and the words “but not after the year 1970–71” shall be substituted for the words which appear in parentheses in lines 2 and 3 of that subsection.
This Amendment, also, pleads a special case for the profits of the life assurance companies. If I am to plead for special conditions, I obviously must attempt to make a case for them. I believe that there is a good case, which stems from the constitution of all these companies.
In the constitution of every company which carries on life assurance business there will be somewhere a provision that none of the profits can be paid out to their shareholders until the policyholders have had their share. This goes right to the root of the constitution of the company, whether it was created under the Companies Act, by Charter or by Act of Parliament. In each of those three cases there will be a condition in the constitution providing that nothing shall be paid to the shareholders until the policyholders have had their share of profits.
In going back to the beginning of these companies, one finds that it took a certain time to decide what the profits were. Clearly, in doing life assurance business the number of risks to be faced in the first year may be quite different from the number of risks giving rise to claims in the second year. Merely because in the first year of business one had, perhaps, rather few claims and, therefore, rather good results, does not mean that all those results could be allocated to profits. It was necessary to have quite a period of time to decide what the profits were.
For that reasons, companies did not decide upon their profits for a period of one year or two, three or five years. These periods became known as the valuation periods. At the end of whatever was the valuation period the company made a valuation of the funds to determine what profits were available. In fact, no profits were paid to shareholders for the duration of the first valuation period and therefore there was a gap from the start of the company to the end of its first valuation period in which nothing was paid to shareholders.
At the end of the valuation period the funds are valued and then allocated. They are first allocated, usually to the tune of about 90 per cent., to policyholders. Those funds are added by way of bonus to the policies straight away. What is left goes to a special fund for the shareholders and the moneys in that fund are paid out during the next valuation period. This [column 356]is the crucial point. The funds which go out during the next valuation period are the profits of the last valuation period. They are not merely deemed to be the profits, or described as the profits, of the last valuation period. They are the profits of the last valuation period because of the constitution and process which I have described.
It follows that if the position is left as it is some of the profits which will be paid during the next valuation period will have already borne their full whack of Income Tax and Profits Tax, but are not necessarily covered by Section 85. To the extent that they are not covered by Section 85, they will, in addition to the tax they have already borne, have to bear another slice of Income Tax at the rate of 41¼ per cent. That means that in so far as the dividends are not covered they would bear a total rate of tax of 72 per cent.
When we discussed Section 85 last year, I understood that the principle was that in so far as dividends are paid out of funds which have borne their full share of Income Tax and Profits Tax they should be relieved from a further slice of Income Tax. That is the principle for which we are pleading today.
The crucial difference between this type of company and others is first the period of valuation, and secondly, the fact that no profits were paid in the first valuation period of the history of the company. We are therefore still five, three or two years, behind whatever is the appropriate valuation period. Unless some relief is given in accordance with the terms of the Amendment, certain of the funds paid to shareholders will bear an extra slice of Income Tax which they should not bear. The special case could not be pleaded by any other company because the constitutions of the companies are different and the valuation is different.
There was an attempt to debate an Amendment similar to this last year, but it was never fully debated. I understand that James Callaghanthe Chancellor of the Exchequer wrote to Mr. William Clark, who, I am sad to say, is not here this year, in the following terms:
“I do not think I could depart from the basic ideas of these reliefs in favour of a particular class of company and in particular I could not afford to allow companies to have relief on the basis that their 1966–67 and later [column 357]dividends ought to be attributed to past profits for this purpose because the company described them or regards them as housing been paid out of past profits.”
That shows that the right hon. Gentleman never got hold of the point. These are not dividends which are merely attributed to past profits or described or regarded as having been pair out of past profits. Because of the process which I have described, they will be dividends which are, and must, because of the constitution of the company, be paid out of past profits.
I hope that the point is clear and that J. Diamondthe Chief Secretary will either agree to consider it or give some measure of relief.
I cannot meet the Amendment at all. We shall finish with the same disagreement. I regret to say, as the one with which we start, because the hon. Lady the Member for Finchley (Mrs. Thatcher) bases her case on an allegation which I cannot accept, that these are not the methods of calculating the profits, but are the profits. This is a difficult matter, but perhaps I could help the hon. Lady and the Committee by going over very shortly the circumstances in which the one-year and three-year surplus reliefs are given.
As the hon. Lady rightly said, most companies carrying on this kind of business value their liabilities at intervals of more than a year. That is not true in very case. One of the biggest companies values them annually. Some value them every two years, some every three years and some every five years.
The hon. Lady will realise that she is asking for a great deal. The essence of the difference between what she is asking for on behalf of life assurance companies and the generality of cases is that we are starting a new tax system. When we do that, we have to have what I can only call a clear-cut start. If every company were to be allowed to say that dividends should be labelled, or described, or calculated by reference to a year in which the old system applied and that therefore, for as long as there were any profits or reserve under the old system which could be used for dividends paid in the future, those dividends should not be called on to pay Schedule F Income Tax, then there would [column 358]be very little revenue coming in for a very long time.
The Committee has agreed that there shall be a clear and clean start, but that in two exceptional cases relief of a transitional nature shall be given to cover the period of change from the old to the new system. One is the one-year surplus and the other the three-year surplus. Neither case fits the circumstances of the life assurance companies' claim, which I understand very well. The hon. Lady has put the case very clearly, and I have listened to it at first hand.
However, I cannot recommend the Committee to accept the Amendment, mainly because the life companies would be claiming for themselves exceptional treatment on a basis which has no relevance to the reasons which led to the treatment of all other companies, and, secondly because I do not accept what the hon. Lady says, namely, that these are the profits of those earlier periods. All that she has done is to describe a method by which profits are arrived at and a practice which holds good. But I still say that all that is happening is that the life assurance companies are, for these purposes, labelling their profits as being applicable to a previous period because when directors declare dividends they do so each year. When they pay it to their shareholders, they refer to it as a dividend of the year, which indeed it is.
Of course it is. It is an almost impossible task to say that a particular dividend comes from a particular profit or a particular reserve. As we know, the whole thing is a pool of money which is fed by a number of different streams and rivers. It cannot be said that a particular distribution represents only certain pound notes which came in from a particular source. I am sorry to say, therefore, that I cannot hold out any hope of meeting the hon. Lady's case.
The Chancellor described the matter very clearly in his letter. We have heard the case on many occasions, and we have listened to it with great sympathy. The hon. Lady has put it with force and clarity again. We know the whole argument and what is in the minds of insurance companies. We cannot distinguish, [column 359]for a different reason, life assurance companies from the generality of companies. Secondarily, we cannot accept the notion that, because there is this method of calculating liabilities from time to time, that necessarily puts such a stamp on the character of the dividends that they can be held to be the dividends in a previous period.
I regret to say that I cannot recommend the Committee to accept the Amendment.
That is one of the most disappointing replies and one of the weakest that we have had from the Government. It is not merely a method of calculating the profits. If J. Diamondthe Chief Secretary has not grasped that it is not, he has not grasped the argument at all. I described not only the valuation, but the procedure which takes place at the end of that valuation period and the way in which the funds are then allocated both to policy holders and translated into a special fund for shareholders.
With all due respect, he was not listening very carefully, because he was chattering nineteen to the dozen to Niall MacDermotthe Financial Secretary. I did not stop him, because I understand that consultation has to take place from time to time. But he is still answering me on the basis of a case which I did not make.
These are not merely dividends which are described as having been paid out of past profits. They are dividends which are paid out of past profits. The proof of the matter is that, in the first five years, if that was the valuation period of the company, no dividends were paid out at all, and that during the next period, five to 10 years, the profits of the first five years were then paid up.
That is the complete answer to the Chief Secretary's case. He is wrong. There is nothing unusual in that, but perhaps I can have the opportunity on another occasion of putting the case to him more effectively.
The Temporary Chairman (Mr. George Rogers)
Does the hon. Lady wish to withdraw her Amendment?
No, Mr. Rogers.
Amendment negatived.[column 360]
Mr. Patrick Jenkin
I beg to move Amendment No. 206, in page 73, line 35, at the end to insert:
(3) Section 55(1) of the Finance Act 1965 shall apply as if after the words “within the charge to Corporation Tax” in the first paragraph there were added “and so far as in any accounting period there still exist allowable losses, they shall be allowed as a deduction from the company's total profits in that accounting period” .
With this Amendment we leave for a moment some of the hideous complexities which surrounded the Amendment which my hon. Friend the Member for Finchley (Mrs. Thatcher) has just moved and to which we shall have to return when we come to the next Clause.
We come now to something which I am sure that the whole Committee will recognise as an entirely intelligible and readily graspable point, which we attempted to make last year and got no change and which we are seeking to return to this year. It attempts to rectify what is a manifest injustice in the combination of the Capital Gains Tax and the Corporation Tax as it affects companies. It was raised during the Committee stage on last year's Bill on 15th June.
The short point is: should a company be entitled to set off any capital losses that it may incur against any revenue profits that it may make so as to charge Corporation Tax only on the balance? The arguments which I put in the debate last year were at some length, and I do not think that it is necessary to rehearse them all again. I shall start simply by quoting what the Chancellor said in his Budget statement last year, where he referred to the rate of tax which a company was going to pay on its capital gains.
The right hon. Gentleman said:
“I propose that capital gains realised by companies—and this applies to both short-term and long-term gains—shall be subject to corporation tax at the corporation tax rate. A company is a continuing association which has as its main purpose making profits; whether those profits arise as trading income or as capital gains is immaterial, and I think that it is right that they should be taxed at the same rate.” —[Official Report, 6th April 1965; Vol. 710, cols. 250–251.]
They should both be charged to Corporation Tax. It is immaterial that they arise in a different way, and they should be taxed at the same rate.
As we know, Corporation Tax is charged on profits, and “profits” are [column 361]defined in Section of the 1965 Act as “income and chargeable gains” . It goes further. Section 46(4) of the Act of last year says:
“A company shall not be chargeable to capital gains tax in respect of gains accruing to it so that it is chargeable in respect of them to corporation tax or would be so chargeable but for an exemption from corporation tax.”
The Act goes out of its way to say that it is Corporation Tax which is charged on the capital gains and not the Capital Gains Tax. In logic, they ought to be treated exactly pari passu. Computation is bound to be different, because, naturally, for something which is in the nature of a capital gain, special rules will have to apply, and I am sure that the Financial Secretary, who argued this ad nauseam last year, will accept that point. But the treatment when the gain has been arrived at after the special rules have been applied should be exactly the same; otherwise one gets what is really a ridiculous position, and it does a manifest injustice to the people concerned.
Take the case of a trading company which makes a trading loss in any year and, in its effort to cut down its unremunerative activities, disposes of part of its assets in the shape of some land. If it happens to realise a capital gain because of the increase in the value of that land over the period that it has held it, it is not entitled to set off that gain against its trading loss. It is taxed on the gain and is only entitled to carry forward the loss to future years if it has no other income to set it against.
One can imagine a company getting itself in serious difficulties, having suffered a series of heavy losses, and carrying out a series of realisations in order to get its business straight. Because of the length of time for which it has held its assets or because of the impact of inflation, there is a paper profit on the realisation of those capital assets, and it pays tax on that paper profit. As the legislation stands at present, it has no right to set off those gains against the trading losses that it is making. Yet the gains are realised in exactly the same state, namely, the business being carried on. It is the same enterprise, and no relief is given. Of course, I exclude dealing companies, because capital gains does not come into that sphere at all.
Our taxing statutes sometimes go to great lengths to try and do justice to [column 362]particular taxpayers. Some of the highly complex transitional provisions which I fully concede the Government introduced last year were introduced as relieving measures, sometimes at the third or fourth attempt to give adequate relieving measures, and they have caused considerable headaches to companies and their professional advisers, all in the interests of equity.
It is recognised that taxation should broadly be calculated on the basis of what people are able to bear. The taxable capacity of the taxpayer is what counts. If one looks at the history of Income Tax, one finds that for years it has been recognised that it is unfair to tax profits without giving relief for losses, and that successively over the years new provisions have been introduced to the Income Tax Acts effectively to give relief for losses.
If a person has two taxable trades, and one makes a profit and one makes a loss, he strikes a balance and pays tax on that. If a person has other income arising in the same year, he can set losses on trade off against that other income. He can carry forward losses. He can carry back losses. Any number of provisions are made to recognise the truth that a company should pay tax on the net income left in its hands after it has had relief for any losses incurred.
The only one which is at present outstanding, and it stands out like a sore thumb and gives rise to the injustice of which I complain, is that a company can still pay Capital Gains Tax, and still pay Corporation Tax on its capital gains, while it is making trading losses. I do not necessarily say that we have the drafting right, but the simple adjustment which is proposed will remove a manifest unfairness. Companies which find themselves in this position regard it as unfair, and I am certain that this is an Amendment which the Government ought to accept.
I am sure that the Committee is grateful to the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) for moving the Amendment, because it shows that there is still a misunderstanding about the nature of the Capital Gains Tax. I hope that I [column 363]shall succeed in removing this misunderstanding, although many previous attempts have been made to do so.
Let me go straight to the strongest part of the hon. Gentleman's argument. He says that where there are trading losses they are set off against other kinds of income—that is correct—and that where other kinds of income were added to by the new Capital Gains Tax it followed from the previous treatment that any trade losses should be set off against all other forms of taxable income, including realised capital gains. Thus, we have the situation which the hon. Gentleman rightly described, that a person can set off all trade losses against other forms of income no matter of what kind. That is a wholly logical way of dealing with the tax position.
I now invite the hon. Gentleman to consider non-trading losses. We have established the logical treatment of trading losses. There are now non-trading losses to be considered. There are three categories of non-trading losses, and the hon. Gentleman has mentioned only one. The first is Case VI of Schedule D, where there is a deficiency, out this cannot be called a non-trading loss.
The second one is Case VIII of Schedule D, which refers to income from real property, where a person can have a minus quantity, a deficiency. The third one is capital gains where a person can have a capital loss, not a trading loss but a deficiency.
In all these three cases we follow the same rule. The well-established rule which existed for Case VI was followed for Case VIII, and it is now being adopted for Capital Gains Tax, namely, that as these are not trading losses, but are of a separate category, we treat them justly by allowing losses to be set against surpluses, deficits to be set against surpluses, but we keep each one of them in its own compartment, which is the only sensible way of calculating and assessing.
Case VI is kept in its own compartment. Case VIII is kept in its own compartment, and we keep capital gains less deficits in their own compartment by setting them against future realised [column 364]capital gains. I hope, therefore, that I have explained to the hon. Gentleman and to the Committee why it is logical that we should give trading losses the benefit of the tax relief in respect of income of all kinds including capital gains, and why it is logical that non-trade losses should, in the case of capital gains, be treated in the same way as the other two categories of Case VI and Case VIII, and be dealt with in their own compartments.
In those circumstances, I am sorry that I cannot recommend the Amendment to the Committee.
Mr. Patrick Jenkin
I beg to move Amendment No. 308, in page 74, line 43, to leave out “II” and to insert “I” .
This is a very short point. Indeed, I venture to suggest that it is the shortest point on the Bill, but it appears that something has gone wrong with the draftsmanship. There is a reference to Part II of the Eleventh Schedule to the 1965 Act. It appears that it really ought to be Part I. I believe that this is a correct Amendment, and I am certain that the Government will accept it.
The Financial Secretary to the Treasury (Mr. Niall MacDermot)
The hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) is quite right, and the Committee is indebted to him. If it is not out of order, I should like to move that he go to the top of the class. With his eagle eye he has spotted a printing error which was not noticed by the various proof readers and others. The hon. Gentleman has thereby helped us to put right something which would otherwise have been omitted. The only time that I was in the happy position of being able to suggest a drafting error to the Government the Amendment was not selected. The Government moved it themselves, on Report.
Mr. Patrick Jenkin
I am grateful to the hon. and learned Gentleman for his remarks. I did a similar thing last year. I was able to pull the Minister without Portfolio's leg, but last year we had a different sort of Finance Bill.
Amendment agreed to.[column 365]
I beg to move Amendment No. 204, in page 75, line 9, after “but” to insert “created by charter or” .
This is a short point. At present, chartered companies such as the London Assurance Company, or the British South-Africa Company, seem to be excluded from the relief given by paragraph 2 of Schedule 13 to the Finance Act, 1965. This sub-paragraph which we are considering makes some amendments to that Act, but the question is whether the amendments it makes will bring chartered companies within the relief provided by that Act.
This sub-paragraph says:
“In Part I of Schedule 13 to the Finance Act 1965 references to a company shall include references to any company resident in the United Kingdom but formed under the law of a country or territory outside the United Kingdom.”
Niall MacDermotThe Financial Secretary may tell me that a company created by charter is a company formed under the law of a country, but the opposite case is arguable. I know that, in certain other cases on the same Schedule, he himself has differentiated between the companies formed under the law of this country and companies created by charter. In a part of Schedule 5, both are expressly mentioned.
I doubt whether it was the intention of the Committee last year to exclude companies created by charter from relief. I should be grateful if the Financial Secretary will tell me whether they are excluded or included in the term “formed under the law of a country” . If it is necessary, I hope that he will accept the Amendment.
The answer to the hon. Lady's questions is that chartered companies are not excluded at the moment and there is no reason why they should not be. We therefore look favourably on the point raised by the Amendment. Last year, this relief was originally given in the case of groups of companies, but was limited to groups of companies resident in the United Kingdom and companies within the meaning of the Companies Act. That excluded companies which, though resident here, were registered abroad. In that case, they did not come within the Companies Act and paragraph 15 of this Schedule removes that deficiency. There is no reason why [column 366]a company resident here should not be regarded as satisfying the test for the purpose of this relief.
Oddly enough, the question of chartered companies has never been brought to our attention before. If it had occurred to us, we should have covered it. With all the many representations which we received last year—no doubt the interests of chartered companies were affected—none made representations to us. Otherwise, we should certainly have included it in the paragraph. As I said, we are favourably disposed towards the Amendment, but I would ask the hon. Lady to give us time to look further at it. At first sight, it appears to us that it may not go far enough. There are other companies which are incorporated, for example by special Act of Parliament or by letters patent, which do not come yet within the provisions.
We are not yet certain of the right formula which would cover all the interested companies and we want to test the validity of the formula before bringing it before the Committee. If the hon. Lady would be good enough to withdraw her Amendment, I will gladly give an undertaking to bring forward a suitable Amendment on Report. We are grateful to her.
I am grateful to the Financial Secretary. I hope that this time he will manage to include all companies which he intends to include. I therefore beg to ask leave to withdraw the Amendment.
Amendment, by leave, withdrawn.