I move amendment No. 62.
In page 76, subsection (1) (a), to delete lines 4 to 35 and substitute the following:
"(3) (a) Notwithstanding the provisions of subsection (3) of section 41 of the Finance Act, 1980, in determining the income of a company, referred to in the expression ‘the income from the sale of those goods', for the purposes of subsection (2) of the said section 41, it shall be the sum determined by subsection (3) of the said section 41 for that period reduced by any charges on income paid for the purpose of the sale of goods which are allowed as a deduction against the total profits of the company for that period and paid on or after the 1st day of April, 1992.
(b) Where for any accounting period of a company—
(i) the corporation tax referable to the income of the company from the sale of goods falls to be reduced under section 41 of the Finance Act, 1980, and
(ii) charges on income paid, on or after the 1st day of April, 1992, for the purpose of the sale of goods have been allowed as a deduction against total profits,
then, notwithstanding section 46 of the said Act, the charges on income paid for the purpose of the sale of goods shall be deducted from the amount of the relevant deduction in relation to the period for charges on income in subsection (1) of section 46 of the said Act.'.".
Subsection 1 (a) of section 43 of the Bill provides for a restriction on a set off of charges on income paid in the course of activities qualifying for the 10 per cent scheme of corporation tax. The restriction is set out in a new section, section 10 (a), to be inserted in the Corporation Tax Act of 1976 where a 10 per cent company incurs charges on income such as royalties on a manufacturing process. The new section 10 (a) will restrict the set off of those charges to set off against the income chargeable at 10 per cent included in the company's profits. Essentially the expenses of 10 per cent activities are being ring fenced so that they do not reduce the amount of income or profits of a company which will be charged at a standard corporation tax of 40 per cent. Under the new section 10 (a), part of the company's profits will be treated as reduced by 10 per cent charges on income. The part of profits treated as reduced will be income from 10 per cent activities and to the extent that profits representing income from 10 per cent activities are reduced by charges in income, that income will not be charged to corporation tax. The 10 per cent rate is applied by charging income to corporation tax at 40 per cent and by deducting a relief equal to three quarters of the tax of 40 per cent. However, where income has not been charged at all due to the set off of charges it would be inappropriate to give relief from corporation tax calculated by reference to that income.