324 SECRETARIAL PRACTICE
is made, for the depreciation not yet allowed, 7.e. the differ-
ence between the written-down value and what is realised
as the scrap value. In this way, by the time a given machine
1s disposed of, the whole of the capital invested in it will have
been allowed for against profits. This allowance for obsolete
machinery is not however to exceed the cost of the new
machinery, less the scrap value of theold. (Special conditions
relate to wear and tear of plant rented, to plant on hire-
purchase agreements, to ships, etc., details of which would
be out of place in a general work, but which can be found in
technical taxation manuals.)

(3) Interest received which has been subjected to United
Kingdom income tax, including mortgage and debenture inter-
est, and all dividends. The amount to be deducted is either
the gross or the net sum, whichever has been brought to credit
of the account. If the gross sum has been brought in as a
receipt, and the tax thereon charged as an expense, the
disallowance of both will give the same effect. Bank deposit
interest and other untaxed interest are often deducted also,
and separately charged under Case III. of Schedule D, but it is
not uncommon to let them remain in the general liability of the
business. If there is a general interest account it will require
scrutiny. Theoretically, the balance of the account should
be brought into the computation, to be deducted from profit
if the receipts are greater than the payments of interest in the
year, and vice versa if they are less. This assumes that all the
interest is annual, and consequently paid or received under
deduction of tax. As the account commonly consists in the
main of non-annual interest (e.g. trade interest, interest to or
from bankers, or on bills), which is paid in full, and is there-
fore assessable on the recipient, it is necessary to analyse the
interest account to ascertain the true liability or claim to relief.

The well-known case of Goslings and Sharpe v. Blake [ (1880),
23 Q.B.D. 324] sought to define ‘annual interest.’ In
general it may be said that interest at varying rates and for
periods less than a year is to be returned for tax by the
banker, broker, or other lender, and not by the company,
and that if evidence be produced to the inspector in support
of the claim, allowance will generally be made. It follows
that if any interest upon trade accounts, foreign invest-
ments, &c., has been received without deduction of United
Kingdom tax, such part of the revenue must not be deducted
in computing the assessable profits.

(4) Depreciation or wear and tear allowance is not
taken off the profits, but is an allowance from the assess-
ment. It represents the diminished value during the vear of