The Finance Act, 1965 (which will be referred to in this paper as ‘the Act’) introduced two major changes into the United Kingdom system of taxation: firstly, it introduced a corporation tax applicable to company profits in place of the income tax and profits tax to which those profits were previously subject; and secondly, it imposed a charge to tax on all capital gains, with certain exceptions, whether these gains accrued to a company or to an individual. The objects of these changes and the various associated arrangements were:

(1) To make the tax system more equitable by bringing into charge certain capital gains, frequently speculative gains, which had previously escaped tax altogether.

(2) To make the tax system more simple in some respects by separating the taxation of companies from the taxation of individuals and by levying corporation tax on a current year basis.

(3) To encourage the retention of profits by companies.

(4) To improve the country's immediate balance of payments by rendering overseas investment less attractive.