This section is designed to prevent a possible abuse. It applies in the case where an equity holder whose rights in a distribution of profits or assets on the winding up are limited by reference to a specified amount or amounts. For example, an equity holder may be entitled to dividends up to a total of £5,000, but no more, or he may be entitled to all the assets up to £10,000 on a winding up, but to only 1 per cent of the excess. Such arrangements could be used to manipulate the purported interests in a company for the purpose of qualifying for group relief. This section prevents such manipulation. I circulate an example of what we have in mind here.

What is the present position in regard to a group of companies? This is something that has developed very much within the last 20 years and has become what might be called a technique. Was that device used to deplete the Revenue, as far as Revenue knows. Legally was there anything in that device that was objectionable from their own point of view?

No, because group relief was not available. Group relief is only being given——

There was nothing there to tempt anyone in that direction?

No.

At the present moment what is the legal position and the actual position?

The legal position at present is that group relief is not available. Since the publication of the White Paper, particularly in view of the length of time it took to complete the drafting of the legislation, it was agreed that group relief be given on a concessional basis, and the restrictions which we have in this Bill against possible abuses are also being applied so that what we are doing now is putting in statutory form the——

Results of experience here.

Yes, of experience, not merely of this country but also elsewhere. The various loopholes we are closing were identified in practice elsewhere and closed. We have the advantage of hindsight at the expense of others.

Essentially it boils down to this: from a legal point of view we are giving for the first time a special relief?

Yes.