INCOME TAX

LT
The Dominion rate of tax in respect of which relief is granted
is, according to the Act, that paid for the Dominion Income
Tax year corresponding with the British year in which the
income is taxed.

The rate of relief allowable is not a fixed rate, but is deter-
mined under the Act as follows: —

(a) if the Dominion rate of tax does not exceed one-half
of the appropriate rate of United Kingdom tax, as
defined by part II (2) of the 5th schedule to Finance Act,
1927, the rate at which relief is to be given shall be the
Dominion rate of tax.
in any other case the rate at which relief is to be given
shall be one-half of the appropriate rate of United
Kingdom tax.

In the case of a company chargeable to United Kingdom
income tax on the whole of its profits, relief, calculated by
reference to the standard rate of United Kingdom income tax,
is allowable to the company in connexion with its schedule D
assessment.

The rate of United Kingdom income tax deductible from
dividends by a company obtaining relief is the rate as reduced
by the relief granted to the company. This applies equally
to dividends on preference shares and ordinary shares (Sheld-
rick v. South African Breweries (1923), 1 K.B. 173; see also
Gold Fields, etc., Co., v. Consolidated Gold Fields, etc., Ltd.
(1926), 1 Ch. 338).

In the case of tax-free dividends of British Companies the
‘gross’ amount of the dividend is arrived at by writing up the
dividend by reference to the reduced rate of United Kingdom
income tax applicable only.

In the case of a company not chargeable to United Kingdom
income tax on the whole of its profits, shareholders should in
strictness claim relief by way of repayment; but, where such
companies have paying agents in this country, the relief is
usually granted to shareholders by deduction of United
Kingdom income tax from their dividends at a rate less than
the standard rate. In order to make this procedure possible,
the Inspector of Foreign Dividends, York House, Kingsway,
London, W.C.2, on application by the paying agent, author-
ises a rate of relief based on the full standard rate of United
Kingdom income tax and issues a specimen form of counter-
foil containing an explanatory memorandum.

Where a company obtaining relief has paid Dominion income
tax at a rate in excess of half the standard rate of United King-
dom income tax, and is not entitled to repayment under the