CHAPTER XXVI

INCOME TAX IN ITS APPLICATION TO TRADING COMPANIES
Tue law, administration, and practice of the Income Tax
Acts are, despite the valuable Consolidation Act of 1918,
of so extensive and complicated a character that it is only
possible within the limits of this chapter to treat of a few
of the general principles involved, the knowledge of which is
absolutely essential to a secretary of a Joint Stock Company
engaged in trading, in order that he may be enabled to draw
up the necessary returns and put forward such claims for
relief as either the Acts, the practice of Commissioners in
their discretion, or recent decisions in the Courts, afford him
the opportunity of pursuing. Accordingly this chapter deals
with Income Tax Assessments under the following heads:

(1) How profits and salaries are returnable for assessment;

(2) The chief points upon which difficulties may arise in

computing liability;
The question of deduction of income tax from dividend.
etc.

While the statement on Form I. or IA. (corresponding to Procedure.
the old Form 11 or 11a) is the return for assessment of profits
under Schedule D required by statute, the real work in
connection with the liability is done by correspondence and
interviews with H.M. Inspectors upon the annual accounts,
sometimes conducted by the company’s auditors, or by
their own chief accountant, but also frequently by the secre-
tary, according to the organisation of the company and the
complexity of the matters involved. It is now almost the
invariable practice for the annual report, profit and loss
account and balance sheet to be submitted for this purpose,
and the inspector's name and address should be carefully
noted on the list of those to whom such accounts are sent,
in order that they may reach him automatically, and save
both sides the trouble of special applications. They should be
accompanied or followed by statements showing how the
amount proposed to be ‘returned’ as the liability is computed,
and by any subsidiary accounts or statements which have
been found necessary in past experience. In the alternative

(3)