INCOME TAX

329
When adjustments are made in respect of relief granted to
shareholders of Dominion companies by means of a reduced
deduction of United Kingdom tax, the gross dividends are
recalculated by reference to the actual rate of relief applicable
to the shareholders’ dividends in question, and United King-
dom tax is charged at the correct rate on the new ‘gross.’

The British Revenue Authorities take the view that in the
case of preference shareholders of a Dominion company, if the
preference shares are entitled to a dividend at a fixed rate
without further participation in profits and the dividends are
paid at the full fixed rate without deduction of Dominion
income tax, no relief is allowable in respect of any Dominion
income tax paid by the company.

Shareholders frequently ask officials of companies to explain
the basis on which relief is granted, and they are especially
puzzled when an Inspector of Taxes sets off against an amount
of tax repayable an item termed ‘ Dominion relief over-allowed.

Seeing that the individual's ‘appropriate rate’ of United
Kingdom tax is the factor which in most cases determines the
rate of relief allowable, the two following examples will serve to
illustrate the manner in which this rate is arrived at: —

Taxable Income.
£33
[A

~ - p
i

-~ pe
7.8 % 5
Uw

426
4. (Appropriate rate say 3s. 7a.)

B

1000
Taxable Incom
£225
2000

5400d.
960004.
I0I400d.

Rate of Income Tax (
For the preceling vear ¢*
to £87 10s. =.' + 7
Tax rate is th
The appre,
and 7d. Sur

]

Sa == 45'57d. ) 3s. 10d.
Assessment Sur Tax amounting
« income of f3000. The Sur
ar, Pram
~d. (3s. 10d. Income Tax