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14 1942

FINANCE ACT, 1942

PART IV.

Corporation Profits Tax.

Provisions as to certain companies commencing business less than two years before 31st August, 1939.

12. —(1) Any company which commenced to carry on its trade or business more than one year but less than two years before the 31st day of August, 1939, and in respect of which there has not been a trade year ending in the year ended on the 31st day of August, 1939, may by application in writing to the Revenue Commissioners request the Revenue Commissioners to determine the profits of such company for the period of twelve months beginning on the date on which such company commenced to carry on its trade or business.

(2) Whenever a company makes to the Revenue Commissioners such request as is mentioned in the foregoing sub-section of this section, such company shall furnish to the Revenue Commissioners such accounts, particulars, and information as they shall require from it for the purpose of complying with such request, and thereupon, if, but only if, the Revenue Commissioners are satisfied that they can make, from the accounts, particulars, and information so furnished, by such company, a just estimate of the profits of such company for the period of twelve months beginning on the day on which such company commenced to carry on its trade or business, the Revenue Commissioners shall determine the profits of such company for the said period of twelve months and shall inform such company in writing of such determination and of the amount thereof.

(3) Where the Revenue Commissioners have determined, under the foregoing provisions of this section, the profits of a company for the period of twelve months mentioned in those provisions, the following provisions shall, notwithstanding anything contained in sub-section (1) of section 38 of the Finance Act, 1941 (No. 14 of 1941), apply and have effect, that is to say:—

(a) the standard profits of such company for the purposes of Part V of the said Act shall be the amount of the profits so determined of such company or the sum of two thousand five hundred pounds, whichever is the greater;

(b) paragraph (d) of sub-section (1) of the said section 38 and sub-section (2) of that section shall apply to such company in like manner as if one of the paragraphs (a), (b), and (c) of the said sub-section (1) were applicable to such company and the standard profits of such company had been calculated accordingly.

(4) This section shall apply and have effect in respect of every accounting period beginning on or after the 1st day of January, 1941, and also in respect of the portion subsequent to the 31st day of December, 1940, of an accounting period which began before and ended on or after the 1st day of January, 1941.

Standard profits of a company succeeding to the business of another company.

13. —(1) Where—

(a) a company (in this section referred to as the successor company) has succeeded to the whole of the trade or business carried on, immediately before such succession by another company (in this section referred to as the predecessor company), and

(b) the successor company was incorporated for the purpose of so acquiring and taking over the said trade or business so carried on by the predecessor company, and

(c) the successor company carries on, after such succession, the trade or business so carried on by the predecessor company, and

(d) the successor company has not had three consecutive trade years the last of which ended on the 31st day of August, 1939,

the following profits may, on the application of the successor company, be treated as profits of the successor company for the purpose of computing the standard profits of that company, that is to say, the profits of any trade year or trade years which might have been brought into account for the purpose of ascertaining the standard profits of the predecessor company if the said succession had not occurred and the predecessor company had continued to carry on the said trade or business and had become chargeable to excess corporation profits tax in respect of the profits of that business.

(2) Where an application under the foregoing sub-section of this section is made and effect is given to that application, the following provisions shall apply and have effect in relation to the ascertainment, for the purposes of a charge to excess corporation profits tax, of the profits of the successor company arising in any accounting period or part of an accounting period, that is to say:—

(a) section 41 of the Finance Act, 1941 (No. 14 of 1941), as amended by this Act, shall not apply;

(b) if the successor company is a company the directors whereof have a controlling interest therein, the total amount of deductions to be allowed in respect of the remuneration of the directors shall not exceed the total amount of the deductions allowed in respect of the remuneration of directors in the ascertainment of the standard profits of the successor company;

(c) the amount of any deduction on account of wear and tear or renewals or obsolescence of any machinery or plant acquired by the successor company from the predecessor company shall, where necessary, be so reduced as to secure that such deduction is not greater than the deduction which would have been allowed in respect of that machinery or plant in ascertaining, for the purposes of a charge to excess corporation profits tax, the profits of the predecessor company if that company had continued to carry on, during the relevant accounting period or part of an accounting period, the trade or business mentioned in the said foregoing sub-section and had retained the said machinery and plant for the purposes of the said trade or business as so carried on.

(3) This section shall apply and have effect in respect of every accounting period beginning on or after the 1st day of January, 1941, and in respect of the part of any accounting period beginning before that date which is subsequent to the 31st day of December, 1940.

Provisions in respect of deficiencies of profits occurring in certain accounting periods.

14. —(1) For the purposes of this section every accounting period beginning on or after the 1st day of January, 1941, and also the portion subsequent to the 31st day of December, 1940, of an accounting period which began before and ended on or after the 1st day of January, 1941, shall be a chargeable accounting period, and the expression “chargeable accounting period” shall, in this section, be construed accordingly.

(2) For the purposes of this section a deficiency of profits, shall be deemed to have been incurred by a company in a chargeable accounting period where the profits of such company for such period as computed for the purposes of a charge to excess corporation profits tax are less than the standard profits of such company or such company incurs a loss in such period or such company neither makes any profits nor incurs a loss in such period, and references in this section to a deficiency of profits shall be construed accordingly.

(3) Where a company incurs a deficiency of profits in a chargeable accounting period, the amount of such deficiency of profits shall, for the purposes of this section, be taken to be—

(a) if such company has made profits in such period—the amount by which such profits fall short of the standard profits of such company, or

(b) if such company has incurred a loss in such period—the total of the amount of such loss and the amount of the standard profits of such company, or

(c) if such company has neither made any profits nor incurred a loss in such period—the amount of the standard profits of such company.

(4) The following provisions shall apply and have effect in respect of every deficiency of profits incurred by a company in a chargeable accounting period, that is to say:—

(a) whenever a company incurs, a deficiency of profits in a chargeable accounting period, that deficiency of profits shall be applied in reducing so far as it will extend the aggregate amount of the profits of such company chargeable with excess corporation profits tax in all (if any) previous chargeable accounting periods of such company or, if the said deficiency of profits is not less than the said aggregate amount, in extinguishing that amount, and where, owing to the said deficiency of profits exceeding the said aggregate amount, the said deficiency of profits is not exhausted by the said application or where, owing to there not having been any previous chargeable accounting period in respect of such company, the said deficiency of profits cannot be so applied at all, the said deficiency of profits or so much thereof as remains after such application (as the case may be) shall be carried forward and shall, in the next subsequent chargeable accounting period of such company in which such company has profits chargeable with excess corporation profits tax, be applied in reducing, so far as it will extend, or (where possible) extinguishing those profits and, if the said deficiency of profits is not thereby exhausted, the said carrying forward and other processes shall be repeated until the said deficiency of profits is thereby exhausted;

(b) whenever such company incurs a deficiency of profits (in this paragraph referred to as the earlier deficiency) in a chargeable accounting period and such company incurs another deficiency of profits (in this paragraph referred to as the later deficiency) in a subsequent chargeable accounting period and, when the later deficiency is incurred the earlier deficiency either has not been applied under the foregoing paragraph of this sub-section or (having been so applied) has not been exhausted by such application, the later deficiency shall be added (as the case may be) to the earlier deficiency or to so much of the earlier deficiency as remains after such application, and the amount produced by such addition shall be applied in accordance with the said foregoing paragraph as if it were a single deficiency of profits;

(c) the next preceding paragraph of this sub-section shall apply, with the necessary modifications, whenever, in a case to which that paragraph applies, two or more deficiencies of profits are incurred by such company before an earlier deficiency of profits of such company has been applied under paragraph (a) of this sub-section or before such earlier deficiency of profits (having been so applied) has been exhausted by such application;

(d) the following amounts shall be excluded from the computation of the aggregate amount mentioned in paragraph (a) of this sub-section, that is to say, the amount of all (if any) profits of such company which, at any time before the making of such computation, have been extinguished under the foregoing provisions of this sub-section and all (if any) amounts by which profits of such company have, at any time before the making of such computation, been reduced under the said foregoing provisions.

(5) For the purpose of calculating whether a company has or has not incurred a deficiency of profits in a chargeable accounting period which is less than twelve months and for the purpose of computing the amount of such deficiency of profits (if incurred), the standard profits of such company shall be taken to be the sum bearing the same proportion to the standard profits of such company as computed under Part V of the Finance Act, 1941 (No, 14 of 1941), and this Part of this Act as the said chargeable accounting period bears to twelve months.

(6) The loss incurred by a company in a chargeable accounting period shall be computed for the purposes of this section in the like manner as profits are required by law to be computed for the purposes of a charge to excess corporation profits tax.

(7) Any relief to which a company becomes entitled by virtue of this section shall be given by repayment or otherwise.

(8) Sub-section (6) of section 56 of the Finance Act, 1920, and also so much of sub-section (7) of that section and the regulations made thereunder as relates to appeals shall apply and have effect, with the necessary modifications, in relation to the giving of relief under this section (including the amount of any such relief) in the like manner as they apply to assessments to excess corporation profits tax.

Amendment of section 35 of the Finance Act, 1941 .

15. —Sub-section (1) of section 35 of the Finance Act, 1941 (No. 14 of 1941), shall be construed and have effect and be deemed always to have had effect as if the following paragraph were inserted therein in lieu of the paragraph (c) now contained therein, that is to say;—

“(c) neither sub-section (2) of section 45 of the Finance Act, 1925 (No. 28 of 1925), nor sub-section (2) of section 30 of the Finance Act, 1926 (No. 35 of 1926), shall apply and in lieu thereof paragraph (a) of the proviso to sub-section (1) of section 52 of the Finance Act, 1920, shall be construed and have effect as if the words ‘two thousand, five hundred pounds’ were inserted therein in lieu of the words ‘five hundred pounds’ wherever the last-mentioned words occur in the said paragraph.”

Amendment of section 39 of the Finance Act, 1941 .

16. —(1) Section 39 of the Finance Act, 1941 (No. 14 of 1941), shall be construed and have effect and shall be deemed always to have had effect as if the following sub-section were inserted therein in lieu of the sub-section (2) now contained therein, that is to say:—

“(2) The standard payments of a company for dividends and interest in respect of any accounting period or part of an accounting period shall be taken for the purposes of this section to be the amount necessary to provide for whichever of the following amounts is the greater, that is to say:—

(a) the aggregate amount of the following payments in respect of the said accounting period or part of an accounting period, that is to say:—

(i) the dividends on the paid-up preference stock or shares of the company at the fixed rate at which such dividends are payable, and

(ii) dividends at the rate of six per cent, per annum on the paid-up ordinary stock or shares of the company, and

(iii) interest on the debentures or debenture stock (other than debentures or debenture stock issued by way of security for a bank overdraft) of the company at the fixed rate at which such interest is payable, or

(b) the aggregate amount of the following payments in respect of the said accounting period or part of an accounting period, that is to say:—

(i) dividends on the paid-up preference stock or shares of the company, if the company was incorporated before the 1st day of January, 1934, at the rate of seven and one-half per cent, per annum or, if the company was incorporated on “or after that date, at the rate of nine per cent, per annum, and

(ii) dividends on the paid-up ordinary stock or shares of the company, if the company was incorporated before the 1st day of January, 1934, at the rate of seven and one-half per cent, per annum or, if the company was incorporated on or after that date, at the rate of nine per cent, per annum, and

(iii) interest on the debentures or debenture stock (other than debentures or debenture stock issued by way of security for a bank overdraft) of the company, if the company was incorporated before the 1st day of January, 1934, at the rate of seven and one-half per cent, per annum or, if the company was incorporated on or after that date, at the rate of nine per cent, per annum.”

(2) In computing, under sub-section (2) of section 39 of the Finance Act, 1941 (No. 14 of 1941), (as amended by the foregoing sub-section of this section) the standard payments for dividends and interest in respect of any accounting period or part of an accounting, period, of a company which has issued capital after the 6th day of May, 1942, and before the end of the said accounting period or part of an accounting period, the following provisions-shall, apply, and have effect, that is to say:—

(a) the expression “fixed rate” wherever it occurs in the said sub-section (2) (as so amended) shall, in relation to the dividends or interest on the said capital so issued or any part of that capital, be construed and have effect—

(i) if the said company was incorporated before the 1st day of January, 1934, as meaning whichever of the following rates is the lesser, that is to say, the fixed rate at which the said dividends or interest (as the case may be) are or is actually payable or the rate of seven and one-half per cent. per annum, or

(ii) if the said company was incorporated on or after the 1st day of January, 1934, as meaning whichever of the following rates is the lesser, that is to say, the fixed rate at which the said dividends or interest (as the case may be) are or is actually payable or the rate of nine per cent. per annum;

(b) unless the Revenue Commissioners because of the existence of special circumstances in any particular case otherwise direct, whichever of the following sub-paragraphs is applicable shall apply and have effect, that is to say:—

(i) if the said capital so issued is the first issue of capital made by the said company and it is not shown to the satisfaction of the Revenue Commissioners that the said capital is represented fully by tangible assets owned by the said company at the time of the issue of the said capital, such amount (whether a part or the whole) of the said capital as is, in the opinion of the Revenue Commissioners, not so represented shall be excluded and deducted from the capital of the said company for the purpose of computing the said standard payments for dividends and interest and, if the said capital includes more than one class of capital, the amount of the said capital to be excluded and deducted as aforesaid shall be apportioned rateably amongst the different classes of the said capital, or

(ii) if the capital so issued is not the first issue of capital made by the said company and it is not shown to the satisfaction of the Revenue Commissioners that on the issue of the said capital so issued there had been an increase in the tangible assets of the said company in full proportion to the amount of that capital, such amount (whether a part or the whole) of the said capital so issued as is not fully represented by such increase of the said tangible assets shall be excluded and deducted from the capital of the said company for the purpose of computing the said standard payments for dividends and interest and, if the said capital so issued includes more than one class of capital, the amount of the said capital to be excluded and deducted as aforesaid shall be apportioned rateably amongst the different classes of that capital;

(c) in this sub-section—

(i) preference stock or shares, ordinary stock or shares, and debentures or debenture stock (other than debentures or debenture stock issued by way of security for a bank overdraft) and nothing else shall be regarded as capital, and the word “capital” shall be construed accordingly,

(ii) the amount of any capital shall be taken to be the nominal amount thereof,

(iii) preference stock or shares, ordinary stock or shares, and debentures or debenture stock (other than as aforesaid) shall each be taken to be a different class of capital.

Amendment of section 41 of the Finance Act, 1941 .

17. —(1) Section 41 of the Finance Act, 1941 (No. 14 of 1941), shall be construed and have effect and be deemed always to have had effect as if the following sub-section were inserted therein in lieu of the sub-section (3) now contained therein, that is to say:—

“(3) In sub-section (1) of this section, the expression ‘standard payments in respect of the said new issue’ means the amount necessary to provide for whichever of the following amounts is the greater, that is to say:—

(a) the aggregate amount of the following payments in respect of the said accounting period or part of an accounting period, that is to say:—

(i) the dividends on such (if any) paid-up preference stock or shares as was included in the said new issue—at the fixed rate at which such dividends are payable, and

(ii) dividends at the rate of six per cent. per annum on such (if any) paid-up ordinary stock or shares as was included in the said new issue, and

(iii) interest on such (if any) debentures or debenture stock (other than debentures or debenture stock issued to replace an equal amount of debentures or debenture stock issued before the expiration of the trade year which ended in the year ended on the 31st day of August, 1939) as were included in the said new issue—at the fixed rate at which such interest is payable, or

(b) the aggregate amount of the following payments in respect of the said accounting period or part of an accounting period, that is to say:—

(i) dividends on such (if any) paid-up preference stock or shares as was included in the said new issue, if the company was incorporated before the 1st day of January, 1934, at the rate of seven and one-half per cent. per annum or, if the company was incorporated on or after that date, at the rate of nine per cent per annum, and

(ii) dividends on such (if any) paid-up ordinary stock or shares as was included in the said new issue, if the company was incorporated before the 1st day of January, 1934, at the rate of seven and one-half per cent. per annum or, if the company was incorporated on or after that date, at the rate of nine per cent. per annum, and

(iii) interest on such (if any) debentures or debenture stock (other than debentures or debenture stock issued to replace an equal amount of debentures or debenture stock issued before the expiration of the trade year which ended in the year ended on the 31st day of August, 1939) as were included in the said new issue, if the company was incorporated before the 1st day of January, 1934, at the rate of seven and one-half per cent. per annum or, if the company was incorporated on or after that date, at the rate of nine per cent. per annum.”

(2) In computing under sub-section (3) of section 41 of the Finance Act, 1941 (No. 14 of 1941), (as amended by the foregoing sub-section of this section) the standard payments in respect of the stock or share capital or debentures or debenture stock referred to in that section as the new issue in any accounting period or part of an accounting period, the expression “fixed rate” wherever it occurs in the said sub-section (3) (as so amended) shall, in relation to dividends or interest on so much (whether a part or the whole) of the said new issue as was made after the 6th day of May, 1942, and before the end of the said accounting period or part of an accounting period, be construed and have effect—

(a) if the said company was incorporated before the 1st day of January, 1934, as meaning whichever of the following rates is the lesser, that is to say, the fixed rate at which the dividends or interest (as the case may be) in relation to which the said expression is used are or is actually payable or the rate of seven and one-half per cent. per annum, or

(b) if the said company was incorporated on or after the 1st day of January, 1934, as meaning whichever of the following rates is the lesser, that is to say, the fixed rate at which the dividends or interest (as the case may be) in relation to which the said expression is used are or is actually payable or the rate of nine per cent. per annum.

Amendment of section 43 of the Finance Act, 1941 .

18. —(1) Section 43 of the Finance Act, 1941 (No. 14 of 1941), is hereby amended by the insertion in paragraph (a) thereof of the following sub-paragraph (ii) in lieu of the sub-paragraph (ii) now contained in that paragraph, that is to say:—

“(ii) the amount of the remuneration which was allowed in determining the standard profits of such company or which would have been so allowed if in determining the said standard profits all references to the sum of two thousand five hundred pounds had been deleted from the provisions in this Part of this Act relating to the determination of standard profits;”.

(2) The amendment of the said section 43 made by the foregoing sub-section of this section shall apply and have effect in relation to every accounting period ending after the 31st day of December, 1941.

Operation of certain provisions where assessment final.

19. —Where a provision contained in this Part of this Act relates to an accounting period or part of an accounting period ended before the date of the passing of this Act (whether it does or does not also relate to an accounting period or part of an accounting period ended on or after that date), effect may be given to that provision in respect of any such accounting period or part of an accounting period ended before the said date notwithstanding that an assessment in respect of that accounting period or part of an accounting period has become final.

Construction of this Part of this Act.

20. —This Part of this Act shall be read and construed together with Part V of the Finance Act, 1920, as amended or extended by subsequent enactments, and, in particular, shall be read and construed together with Part V of the Finance Act, 1941 (No. 14 of 1941).