§ 7. Mr. David Mitchell
asked the Chancellor of the Exchequer whether he will consider allowing companies to include as a liability their contingent liability for redundancy payments when arriving at the profit for which they are assessed for corporation tax.
§ Mr. Denzil Davies
No. It would not be right to allow companies to establish tax-free reserves to meet unquantifiable liabilities which may not arise.
§ Mr. Mitchell
Is the hon. Gentleman aware that the contingent liability here is greater than the assets of many companies and that, as unemployment mounts further and further, we shall see a very serious situation developing in many cases?
§ Mr. Davies
I do not see how the hon. Gentleman can equate the contingent liability with assets. The liability is contingent and, because of that, it cannot be quantified, because no company will know the pattern of redundancy. That is why the hon. Gentleman's suggestion is impractical. I might also point out that companies obtain relief for payments made into the redundancy fund against their corporation tax and for the net cost of paying out, from their own resources, redundancy payments to their employees who are made redundant. We consider that they are adequately compensated in that way.