I move:—
(1) That where any funding bonds are issued to a creditor in respect of any liability to pay interest on a debt to which this Resolution applies, the issue of those bonds shall be treated for all the purposes of the Income-Tax Acts as if it were the payment of an amount of the said interest equal to the value of the said bonds at the time of the issue thereof, and the redemption of the said bonds shall not be treated for any of the said purposes as payment of the said interest or any part thereof.
(2) That this Resolution applies to all debts owing by any government, public authority, or public institution whatsoever or wheresoever and to all debts owing by any body corporate whatsoever or wheresoever.
(3) That in this Resolution the expression "funding bonds" includes all bonds, stocks, shares, securities, and certificates of indebtedness.
This is a case which I also referred to in the course of the Budget statement. It is similar in some respects to the case which has been already dealt with in motion No. 1. A foreign Government issued funding bonds in settlement of interest due on one of its Government loans. They were not able to meet the charge on the loan on the due date and issued funding bonds instead. The English courts have held that in such a case the value of the funding bond was not income to the recipient. The Resolution which we are now dealing with provides that in such a case the issue of a funding bond shall be treated for income-tax purposes as if it were the payment of an amount of interest equal to the value of the bond at the time of issue and, as a corollary, that the redemption of the bond, when it is redeemed, shall not be treated as a payment of interest.