Finance Act, 1944

Provisions in respect of deduetions for the remuneration of directors in relation to excess corporation profits tax.

13.—(1) 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 profits, for any accounting period ending after the 31st day of December, 1943, 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 the profits of a trade year, the amount of the deduction in respect of the total remuneration of all directors (in this sub-section referred to as the total deduction) to be allowed shall not exceed the total deduction which was allowed in computing, under the enactments for the time being in force in relation to corporation profits tax, the profits of the company for that trade year;

(b) in the case of a company, the standard profits of which are the substituted standard or the sum of two thousand five hundred pounds, and which had one and only one trade year (being a trade year ended in the year ended on the 31st day of August, 1939) or which had two and only two consecutive trade years the later of which ended in the year ended on the 31st day of August, 1939, or which had three or more consecutive trade years the last of which ended in the year ended on the 31st day of August, 1939, the total deduction to be allowed shall not exceed the total deduction which was allowed in computing, under the said enactments, the profits of the company for—

(i) if there was one and only one such trade year, that trade year, or

(ii) if there were two and only two such consecutive trade years, whichever of those trade years there was so allowed the greater total deduction, or

(iii) if there were three and only three such consecutive trade years, whichever of those trade years there was so allowed the greatest total deduction, or

(iv) if there were four or more such consecutive trade years, whichever of the last three of those trade years there was so allowed the greatest total deduction;

(c) in the case of a company the standard profits of which are the substituted standard or the sum of two thousand five hundred pounds and which had no trade year ended in the year ended on the 31st day of August, 1939, the total deduction to be allowed shall not exceed a sum representing three per cent. of the paid up issued capital of the company, unless, where the paid up issued capital is not less than fifteen thousand pounds, the Revenue Commissioners otherwise direct, in which case the total deduction to be allowed shall be the amount specified in the direction;

(d) the references in paragraph (b) of this sub-section to the profits of a company for a trade year shall, where the company has incurred a loss for that trade year, be construed as references to the loss of the company for that trade year, and such loss shall be computed in like manner as profits are required by law to be computed for the purposes of a charge to corporation profits tax;

(e) in the application of the provisions of the foregoing paragraphs of this sub-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 total deduction 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;

(f) where, in the case of a company which had one or more trade years, a person, who is a director required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity, was not a director during the trade year, by reference to which the total deduction under paragraph (a) or paragraph (b) of this sub-section is computed, but was during that trade year employed by the company, then, notwithstanding anything contained in this sub-section, the Revenue Commissioners, if they so think fit, may increase the total deduction by such amount (not exceeding the remuneration paid to that person for the said trade year) as they think proper;

(g) in this sub-section—

the word “capital” has the same meaning as it has in sub-paragraph (i) of paragraph (c) of sub-section (2) of section 16 of the Finance Act, 1942 (No. 14 of 1942),

the word “director” includes any person in accordance with whose directions or instructions the directors of a company are accustomed to act, but does not include 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.

(2) Section 43 of the Act of 1941 as amended by section 18 of the Finance Act, 1942 (No. 14 of 1942), shall cease to apply in respect of any accounting period ending after the 31st day of December, 1943.