Period of
Accounts.

Computation
of Income
Tax Profit.

322

SECRETARIAL PRACTICE
the inspector, on receipt of the accounts, will send in a number
of ‘queries’ and fuither requirements, and when these have
been satisfactorily replied to he may forward a computation
of liability and ask whether the company is in agreement. On
agreement the secretary will be in a position to complete the
formal return when Form I. or Form IA. is received. It is not
much use completing this form until the figures are actually
agreed, except in the case where the computation is being
contested on appeal, when the liability as desired by the
company should be shown on this form. The Revenue looks to
the completion of this statutory return as the formal act of
responsibility by the company, notwithstanding all the anterior
or auxiliary correspondence that may have taken place.

For computing liability in established businesses for any
financial year beginning on the 6th April, the last completed
accounts prior to that date (e.g. 31st March or 31st December)
are taken. Until the year 1927-28, it was necessary to take
sufficient earlier accounts to make up in all three years (except
for mines where a five years’ basis, and railways, and other
specified concerns where one year, was adopted). The
liability was the average for one year of the adjusted profits
of the whole period. By the Finance Act, 1926, mines were
transferred to Schedule D and the liability under Schedule D
was to be assessed on the profits or gains, or income of the
year preceding the year of assessment instead of on the
average for one year of the adjusted profits of the three
years’ period. These provisions first became operative for the
year 1927-28.

If the business was commenced in the year preceding the
year of assessment, the profits of one year from the com-
mencement thereof are taken, and if it is commenced within
the year of assessment a computation is made either on the
full amount of the profits arising in that year or according to
an average of such a period not being greater than one year as
the case may require and the Commissioners direct.

In computing liability it is convenient to commence with
the net profit carried into the balance sheet, and to go through
the expenditure and add back all sums not allowable, and
then make deductions for items allowable but not already
charged in the accounts in getting at the net profit adopted
as the starting point.
ADDITIONS TO TRADING PROFIT
(1) All book-keeping ‘rents’ for premises occupied for
the business and owned by the company, all ground rent,
lease rents and other charges issuing out of such property.