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14 1941

FINANCE ACT, 1941

PART V.

Corporation Profits Tax.

Definitions in this Part of this Act.

34. —In this Part of this Act—

the expression “fixed rate”, when used in relation to a dividend, includes a rate varying with variations in the standard rate of income tax;

references to the preference stock or shares of a company shall be construed as referring to all the issued stock or share capital of the company which carries a right to dividends at a fixed rate payable in priority to all dividends on another part of the capital of the company, whether it does or does not carry a right to some further participation in the profits of the company;

references to the ordinary stock or shares of a company shall be construed as referring to all the issued capital of the company except the preference stock or shares of the company;

references to the debentures or debenture stock of a company shall be construed as referring only to debentures or debenture stock issued in consideration of the payment of money;

the expression “trade year” means a period of twelve months ending either on the date which is the relevant date for the company in relation to which the said expression is used or on a date which is twelve months or a multiple of twelve months prior to that date;

the expression “relevant date” in the next preceding definition means, in relation to any company, the date in the year ended on the 31st day of August, 1939, to which the accounts of such company were last made up or, if the accounts of such company were not made up to any date in the said year, such date in that year as the Revenue Commissioners shall determine to be the relevant date for such company.

Amendments of enactments relating to corporation profits tax.

35. —(1) Paragraphs (c), (d), and (e) of sub-section (1) of section 47 of the Finance Act, 1932 (No. 20 of 1932), shall not apply or have effect in respect of any accounting period ending on or after the 1st day of January, 1941, and in lieu thereof the following provisions shall (subject to the next following section) apply and have effect in respect of every accounting period so ending, that is to say:—

(a) sub-section (1) of section 52 of the Finance Act, 1920, shall be construed and have effect as if for the words “five per cent.” contained therein there were substituted the words “ten per cent.”;

(b) section 31 of the Finance Act, 1928 (No. 11 of 1928), shall be construed and have effect as if for the words “seven and one-half per cent.” contained therein there were substituted the words “twelve and one-half per cent.”;

(c) sub-section (2) of section 30 of the Finance Act, 1926 (No. 35 of 1926), shall not apply and in lieu thereof sub-section (2) of section 45 of the Finance Act, 1925 (No. 28 of 1925), shall apply and accordingly the proviso to sub-section (1) of section 52 of the Finance Act, 1920, shall be construed and have effect as if for the words “five hundred pounds” wherever those words occur in that paragraph there were substituted the words “two thousand five hundred pounds”.

(2) The following provisions shall apply and have effect in respect of every accounting period ending on or after the 1st day of January, 1941, that is to say:—

(a) paragraph (b) of the proviso to sub-section (1) of section 52 of the Finance Act, 1920, shall be construed and have effect as if for the words “ten per cent.” now contained therein there were substituted the words “fifteen per cent.”;

(b) sub-section (4) of section 56 of the Finance Act, 1920 (as adapted by or under subsequent enactments) shall be construed and have effect as if the words “six years after the end of the accounting period or part of an accounting period” were substituted for the words “three years after the end of the accounting period” now contained therein.

Provisions in respect of certain accounting periods.

36. —(1) Paragraph (g) of the proviso to sub-section (2) of section 53 of the Finance Act, 1920, shall not apply or have effect in relation to the ascertainment of profits in an accounting period ending on or after the 1st day of April, 1939.

(2) The following provisions shall apply and have effect in respect of every accounting period (in this sub-section referred to as the said accounting period) which began before and ended on or after the 1st day of January, 1941, that is to say:—

(a) the profits arising in the said accounting period shall be apportioned between the part (in this sub-section referred to as the said earlier part) of the said accounting period which was prior to the 1st day of January, 1941, and the part (in this sub-section referred to as the said later part) of the said accounting period which was subsequent to the 31st day of December, 1940, in proportion to the respective lengths of those parts;

(b) no tax shall be charged on so much of the said profits apportioned to the said earlier part of the said accounting period as bears to five thousand pounds the same proportion as the said earlier part of the said accounting period bears to twelve months;

(c) no tax shall be charged on so much of the said profits apportioned to the said later part of the said accounting period as bears to two thousand five hundred pounds the same proportion as the said later part of the said accounting period bears to twelve months;

(d) in the case of a company incorporated by or under the laws of the State and in the case of a foreign company which has satisfied the Revenue Commissioners that one of the conditions prescribed by sub-section (2) of section 31 of the Finance Act, 1928 (No. 11 of 1928) has been fulfilled in its case, so much of the said profits apportioned to the said earlier part of the said accounting period as remains chargeable shall be charged with tax at the rate of seven and one-half per cent and so much of the said profits apportioned to the said later part of the said accounting period as remains chargeable shall be charged with tax at the rate of ten per cent.;

(e) in the case of a foreign company which has not satisfied the Revenue Commissioners that one of the conditions prescribed by sub-section (2) of section 31 of the Finance Act, 1928 (No. 11 of 1928), has been fulfilled in its case, so much of the said profits apportioned to the said earlier part of the said accounting period as remains chargeable shall be charged with tax at the rate of ten per cent, and so much of the said profits apportioned to the said later part of the said accounting period as remains chargeable shall be charged with tax at the rate of twelve and one-half per cent.;

(f) the amount of tax payable in respect of the profits for the said accounting period of a company incorporated by or under the laws of the State shall in no case exceed the sum of the following amounts, that is to say:—

(i) the amount represented by ten per cent of the balance of the said profits apportioned to the said earlier part of the said accounting period remaining after allowing such proportion of the deductions specified in paragraph (b) of the proviso to sub-section (1) of section 52 of the Finance Act, 1920, as would be appropriate to the said earlier part of the said accounting period if such deductions were apportioned in the same manner as the said profits are required by this sub-section to be apportioned, and

(ii) the amount represented by fifteen per cent of the balance of the said profits apportioned to the said later part of the said accounting period remaining after allowing such proportion of the said deductions as would be appropriate to the said later part of the said accounting period if the said deductions were apportioned as aforesaid.

(3) In the next preceding sub-section of this section the word “tax” means corporation profits tax other than excess corporation profits tax.

(4) In ascertaining, for the purposes of a charge to corporation profits tax (other than excess corporation profits tax) the profits arising in an accounting period ending after the 31st day of December, 1940, in the case of a company the directors whereof have a controlling interest therein, no deduction in excess of an amount calculated at the rate of one thousand pounds per annum shall be allowed in respect of the remuneration of any director, other than a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity and is not the beneficial owner of or able (directly or through the medium of other companies or by any other indirect means) to control more than five per cent. of the ordinary stock or shares of the company.

Excess corporation profits tax.

37. —(1) In addition to the corporation profits tax otherwise chargeable by law, there shall be charged, levied, and paid on the profits mentioned in the next following sub-section of this section corporation profits tax (referred to in this Part of this Act as excess corporation profits tax) at the rate of fifty per cent. of those profits.

(2) The profits on which excess corporation profits tax is made payable by the next preceding sub-section of this section are—

(a) so much of the profits (being profits to which Part V of the Finance Act, 1920, as amended by subsequent enactments, applies) which arise or have arisen in any accounting period beginning on or after the 1st day of January, 1941, as exceeds the standard profits as defined in this Part of this Act, and

(b) so much of the profits (being profits to which Part V of the Finance Act, 1920, as amended by subsequent enactments, applies) which have arisen in the part subsequent to the 31st day of December, 1940, of any accounting period which began before and ended on or after the 1st day of January, 1941, as exceeds the standard profits as defined as aforesaid.

(3) The following provisions shall apply and have effect in relation to excess corporation profits tax, that is to say:—

(a) the profits arising in an accounting period which began before and ended on or after the 1st day of January, 1941, shall be apportioned between the part of that accounting period which was prior to the 1st day of January, 1941, and the part thereof which was subsequent to the 31st day of December, 1940, in proportion to the respective lengths of those parts;

(b) the proviso to sub-section (1) of section 52 of the Finance Act, 1920, shall not apply or have effect.

(4) Excess corporation profits tax shall be a corporation profits tax and accordingly all enactments for the time being in force in relation to corporation profits tax shall (save as is otherwise expressly provided by this Part of this Act) apply and have effect in relation to excess corporation profits tax.

Definition of standard profits.

38. —(1) The standard profits of a company shall be computed in accordance with whichever of the following paragraphs is applicable to the company, that is to say:—

(a) if there have been, in respect of the company, three or more consecutive trade years the last of which ended in the year ended on the 31st day of August, 1939, the standard profits of the company shall be the amount of the company's profits for one (to be selected by the company or (in default of such selection) by the Revenue Commissioners) of the last three of the said trade years or the sum of two thousand five hundred pounds, whichever is the greater;

(b) if there have been, in respect of the company, two and only two consecutive trade years the later of which ended in the year ended on the 31st day of August, 1939, the standard profits of the company shall be the amount of the company's profits for one (to be selected by the company or (in default of such selection) by the Revenue Commissioners) of those two trade years or the sum of two thousand five hundred pounds, whichever is the greater;

(c) if there has been, in respect of the company, one and only one trade year and that trade year ended in the year ended on the 31st day of August, 1939, the standard profits of the company shall be the amount of the company's profits for that trade year or the sum of two thousand five hundred pounds, whichever is the greater;

(d) if one of the foregoing paragraphs of this sub-section is applicable to the company and, when excess corporation profits tax is being assessed on the company for a particular accounting period or part of an accounting period, it is found that the standard profits of the company as calculated in accordance with that paragraph is less than the substituted standard as defined in this Part of this Act applicable to the company in respect of the said particular accounting period or part of an accounting period, the standard profits of the company shall be taken for the purpose of that particular assessment to be the said substituted standard;

(e) if there has not been, in respect of the company, any trade year ending in the year ended on the 31st day of August, 1939, the standard profits of the company shall, for the purpose of the assessment of excess corporation profits tax on the company for any particular accounting period or part of an accounting period, be taken to be whichever of the following amounts is the greater that is to say:—

(i) the substituted standard as so defined as aforesaid applicable to the company for that particular accounting period or part of an accounting period, or

(ii) the sum of two thousand five hundred pounds or, where the said particular accounting period or part of an accounting period is less than twelve months, the sum which bears to two thousand five hundred pounds the same proportion as the said accounting period or part of an accounting period bears to twelve months.

(2) Where excess corporation profits tax is assessed on a company in respect of an accounting period or a part of an accounting period which is less than twelve months and the standard profits of the company are computed otherwise than under either of the two last paragraphs of the next preceding sub-section of this section, the standard profits of the company shall, for the purpose of such assessment, be taken to be the sum bearing the same proportion to the standard profits of such company as computed under the next preceding sub-section of this section (otherwise than as aforesaid) as the said accounting period or part of an accounting period bears to twelve months.

(3) In the computation of the standard profits of a company, the profits of such company which have to be brought into account for the purpose of such computation shall be determined on the same principles as those on which the profits of a company are determined for the purpose of a charge to corporation profits tax, and the enactments for the time being in force in relation to the determination of profits for the purpose of any such charge shall apply and have effect accordingly.

Definition of the substituted standard.

39. —(1) The substituted standard applicable to a company in respect of any particular accounting period or part of an accounting period shall be:—

(a) in the case of a company incorporated by or under the laws of the State, the standard payments of such company for dividends and interest (as defined in the next following sub-section of this section) in respect of the said accounting period or part of an accounting period, or

(b) in the case of a foreign company, an amount which bears to the standard payments of the company for dividends and interest (as defined as aforesaid) in respect of the said accounting period or part of an accounting period the same proportion as the amount of the turnover of the trade or business carried on by the company in the State during such accounting period or part of an accounting period bears to the total turnover of all the trade or business carried on wheresoever by the company during such accounting period or part of an accounting period.

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

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

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

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

Relief in respect of losses in certain cases.

40. —(1) In this section and the next following section the expression “interim period” means, in relation to any company, the period from the expiration of the last or only trade year of such company ending in the year ended on the 31st day of August, 1939, up to and including the 31st day of December, 1940.

(2) If there have been, in respect of a company, three or more consecutive trade years the last of which ended in the year ended on the 31st day of August, 1939, and the net result of the trade or business carried on by such company in the three last of such trade years has been a loss, then and in such case, for the purpose of the assessment of such company to excess corporation profits tax, such loss shall, to the extent to which it exceeds the profits of such company arising in the interim period, be carried forward and, so far as it will extend, be deducted from or set-off against profits of such company chargeable with the said tax.

(3) If there have been, in respect of a company, two and only two consecutive trade years the later of which ended in the year ended on the 31st day of August, 1939, and the net result of the trade or business carried on by such company in those two trade years has been a loss, then and in such case, for the purpose of the assessment of such company to excess corporation profits tax, such loss shall, to the extent to which it exceeds the profits of such company arising in the interim period, be carried forward and, so far as it will extend, be deducted from or set-off against profits of such company chargeable with the said tax.

(4) If there has been, in respect of a company, one and only one trade year and that trade year ended in the year ended on the 31st day of August, 1939, and the net result of the trade or business carried on by such company in that trade year has been a loss, then and in such case, for the purpose of the assessment of such company to excess corporation profits tax, such loss shall, to the extent to which it exceeds the profits of such company arising in the interim period, be carried forward and, so far as it will extend, be deducted from or set-off against profits of such company chargeable with the said tax.

(5) The following provisions shall apply and have effect in relation to the relief provided for in the foregoing sub-sections of this section, that is to say:—

(a) a company shall be entitled to the said relief only where the standard profits of the company are, in pursuance of this Part of this Act, taken for the purpose of assessment to excess corporation profits tax to be the relevant substituted standard or the sum of two thousand five hundred pounds, whichever is the greater;

(b) where a company is entitled to the said relief, the said relief shall be given so far as possible in the assessment of such company to excess corporation profits tax for the first accounting period or part of an accounting period in respect of which such company is chargeable with the said tax, and so far as such relief cannot be given in that assessment it shall be given in the assessment of such company to the said tax for the next accounting period, and so on until such relief has been fully given;

(c) for the purpose of ascertaining whether and to what extent a company is entitled to the said relief, the profits of such company arising in an accounting period part of which was before and part of which was on or on and after the 1st day of January, 1941, shall be apportioned in proportion to the respective lengths of those parts.

(6) For the purposes of this section,—

(a) the loss incurred by a company in a trade year ending on or before the 31st day of August, 1939, shall be computed in the like manner as profits are required by law to be computed for the purposes of a charge to corporation profits tax, and

(b) the profits of a company for the interim period shall be determined on the same principles as those on which the profits of a company are determined for the purposes of a charge to corporation profits tax, and the enactments for the time being in force in relation to the determination of profits and the determination of accounting periods for the purpose of any such charge shall apply and have effect accordingly.

Calculation of profits in certain cases.

41. —(1) Where—

(a) a company (other than a company to which the next following section applies) is assessed to excess corporation profits tax for any accounting period or part of an accounting period, and

(b) the standard profits of such company are, for the purpose of such assessment, computed otherwise than by reference to the substituted standard, and

(c) such company has, since the expiration of the trade year which ended in the year ended on the 31st day of August, 1939, issued stock or share capital or debentures or debenture stock (in this section referred to as the said new issue), and

(d) either the said new issue was made consequent on an invitation to the public to subscribe therefor or the Revenue Commissioners are satisfied that no part of such issue was paid for or satisfied by the utilisation, directly or indirectly, of assets which were in the hands of the company on the last day (in this paragraph referred to as the said day) of the trade year which ended in the year ended on the 31st day of August, 1939 (excluding from such assets a sum equal to the amount (if any) of dividends distributed and directors' remuneration paid within six months after the said day in respect of a period ending on or before the said day) or by the utilisation, directly or indirectly, of profits of the company made after the said day (excluding from such profits so much thereof as was applied in the payment of dividends or of directors' remuneration to an extent not exceeding in rate the average amount of the dividends distributed or directors' remuneration paid (as the case may be) not later than six months after the said day in respect of the three, two, or one years or year by reference to the profits in one of which the standard profits of the company are computed),

then and in every such case, for the purpose of ascertaining the profits on which the said tax is to be assessed as aforesaid, there shall be deducted from the profits on which the said tax would, but for this section, be so assessed an amount, if such company is incorporated by or under the laws of the State, equal to the standard payments (as defined in this section) in respect of the said new issue or, if such company is a foreign company, equal to the amount which bears to the standard payments (defined as aforesaid) in respect of the said new issue the same proportion as the amount of the turnover of the trade or business carried on by the company in the State during the said accounting period or part of an accounting period bears to the total turnover of all the trade or business carried on by such company wheresoever during that accounting period or part of an accounting period.

(2) Where, in the case of a company to which the foregoing sub-section of this section applies, the new issue was made during the interim period as defined in the next preceding section, the provisions of the said foregoing sub-section shall apply and have effect in relation to the profits of such company in the said interim period as if those profits were profits chargeable with excess corporation profits tax and the said interim period were an accounting period.

(3) In the foregoing sub-section of this section the expression “standard payments in respect of the said new issue” means the amount necessary to provide for the aggregate amount of the following payments in respect of the said accounting period or part of an accounting period, that is to say:—

(a) 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

(b) 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

(c) 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.

Provisions in respect of a company which succeeded to an unincorporated business.

42. —Where a company has succeeded to a trade or business which, immediately before such succession was carried on by an individual or by two or more individuals in partnership, and such company carries on a trade or business substantially the same as the trade or business so carried on by such individual or such individuals, and such company is a company the directors whereof have a controlling interest therein, and such company has not had three consecutive trade years the last of which ended in the year ended on the 31st day of August, 1939, then and in such case, if the said individual or all of the said individuals is or are a director or directors of such company, the following provisions shall have effect, that is to say:—

(a) the following profits may, on the application of the company, be treated as profits of the company for the purpose of computing the standard profits of the company, that is to say, the profits of any trade year or trade years which, if the said succession had not occurred and excess corporation profits tax had been chargeable on the profits of such individual or individuals from the said trade or business carried on by him or them, might have been brought into account for the purpose of ascertaining the standard profits of such individual or individuals;

(b) the amount of any profits of such individual or individuals which, under the foregoing paragraph of this section, are treated as profits of the company shall be determined on the same principles as those on which the profits of a company are required by law to be determined for the purpose of a charge to corporation profits tax and the enactments for the time being regulating the determination of the profits for the said purpose shall apply and have effect accordingly;

(c) in the ascertainment of the profits of the company for any accounting period or part of an accounting period for the purpose of a charge to excess corporation profits tax, no deduction shall be allowed in respect of sums paid by the company by way of remuneration to such individual or individuals.

Provisions in respect of deductions for the remuneration of directors.

43. —The following provisions shall apply and have effect in relation to the ascertainment, for the purpose of a charge to excess corporation profits tax, of the amount of the profits of a company the directors whereof have a controlling interest therein, that is to say:—

(a) in the case of a company the standard profits of which are computed otherwise than by reference to the substituted standard, no deduction shall be allowed in respect of remuneration paid to a director in excess of whichever of the following amounts is the greater, that is to say:—

(i) an amount calculated at the rate of one thousand pounds per annum, or

(ii) the amount of the remuneration paid by the company to such director in respect of the trade year by reference to the profits in which the standard profits of the company are computed or would be computed if the said profits of the company were not less than two thousand five hundred pounds;

(b) in the case of a company the standard profits of which are computed by reference to the substituted standard, no deduction shall be allowed in respect of remuneration paid to a director in excess of an amount calculated in accordance with whichever of the following provisions is applicable, that is to say:—

(i) if there have been, in respect of the company, three or more consecutive trade years the last of which ended in the year ended on the 31st day of August, 1939, the average amount of the remuneration paid to such director by the company in respect of the three last of the said trade years or an amount calculated at the rate of one thousand pounds per annum, whichever is the greater, or

(ii) if there have been, in respect of the company, two and only two consecutive trade years the later of which ended in the year ended on the 31st day of August, 1939, an amount equal to half the total remuneration paid to such director by the company in respect of those two trade years or an amount calculated at the rate of one thousand pounds per annum, whichever is the greater, or

(iii) if there has been, in respect of the company, one and only one trade year and that trade year ended in the year ended on the 31st day of August, 1939, the amount of the remuneration paid to such director by the company in respect of that trade year or an amount calculated at the rate of one thousand pounds per annum, whichever is the greater, or

(iv) if there has been, in respect of the company, no trade year ending in the year ended on the 31st day of August, 1939, an amount calculated at the rate of one thousand pounds per annum;

(c) in any case, no deduction shall be allowed in respect of remuneration paid to a director appointed after the end of the trade year which ended in the year ended on the 31st day of August, 1939,—

(i) if such director was so appointed to fill the place of another director, in excess of the maximum amount which would be allowed to be deducted under the foregoing provisions of this section in respect of the remuneration of such other director if he had continued in office, and for that purpose, where such other director was himself appointed during the three consecutive trade years the last of which ended in the year ended on the 31st day of August, 1939, to fill the place of a predecessor or successive predecessors, the remuneration paid to such predecessor or successive predecessors respectively shall be deemed to be remuneration of such former director, or

(ii) in any other case, in excess of an amount calculated at the rate of one thousand pounds per annum;

(d) in the application of the provisions of the foregoing paragraphs of this section to the assessment of excess corporation profits tax in respect of an accounting period or part of an accounting period which is less than twelve months, the maximum amount which may be allowed to be deducted under those provisions in respect of the remuneration of a director shall be reduced to a sum which bears to the maximum amount specified in whichever of those provisions is applicable the same proportion as the said accounting period or part of an accounting period bears to twelve months;

(e) in the case of a company which did not begin to carry on trade or business until on or after the 1st day of September, 1939, no deduction shall be allowed in respect of the remuneration of a director in excess of an amount calculated at the rate of one thousand pounds per annum;

(f) none of the foregoing provisions of this section shall apply or have effect in relation to the remuneration of a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity and is not the beneficial owner of or able (directly or through the medium of other companies or by any other indirect means) to control more than five per cent. of the ordinary stock or shares of the company.

Continuance of certain exemptions.

44. —The exemptions from corporation profits tax given by section 33 of the Finance Act, 1929 (No. 32 of 1929), as amended by section 30 of the Finance Act, 1931 (No. 31 of 1931), and paragraph (b) of sub-section (1) of section 47 of the Finance Act, 1932 (No. 20 of 1932), and continued until the 31st day of December, 1940, by section 29 of the Finance Act, 1938 (No. 25 of 1938), shall be and are hereby continued until the 31st day of December, 1943.

Power to assess tax notwithstanding previous assessment.

45. —(1) Excess corporation profits tax payable under or by virtue of this Part of this Act in respect of profits arising in an accounting period or part of an accounting period may be assessed and recovered notwithstanding that corporation profits tax has already been assessed in respect of those profits.

(2) Any additional corporation profits tax (other than excess corporation profits tax) payable in respect of an accounting period or part of an accounting period by virtue of an alteration in the law made by this Part of this Act which applies to that accounting period or part of an accounting period may be assessed and recovered notwithstanding that corporation profits tax has already been assessed in respect of such accounting period or part of an accounting period.

Construction of this Part of this Act.

46. —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.