INCOME TAX

325
assessment itself; but the usual practice is to take the value of
the machinery and plant as existing at the last balance sheet,
and to calculate the allowance at the rate agreed for a year, as
equivalent to the allowance for the exact year of assessment,
without generally speaking, any addition or deduction for
plant acquired or given up during the year of assessment. With
most companies allowances are computed on the ‘written
down’ value of the asset, all pure renewals, as distinct from
repairs, being added to the capital value and not charged
against revenue. If the assessment in a given year is not
large enough to cover the whole allowance due, the balance
can be carried forward into a future year.

As a general rule, if renewals are allowed to be charged
against revenue (vide 5 above), no wear and tear allowances
are given in respect of that class of plant.

There remain some further matters likely to cause dis
cussion :—

I. Profit on Realisation of Assets. Profits of a capital Other
nature need not be brought into the liability, just as, in the Adjustments.
same way, expenses of a capital nature are not allowed as an
expense, but in the case of a company with wide articles of
association there may be some difficulty in establishing that
particular profits are of a capital nature, although as regards
an occasional realisation of investments for an ordinary
trading company the claim would be admitted without
question.

2. Charities and Donations. While a large amount of
money is often given in charity by the directors of a limited
liability company (especially where the capital or, in par-
ticular, the ordinary shares are held privately) which it
must be admitted is not a proper charge against the business,
there are other donations and subscriptions to which the
same considerations do not apply, as for example, sub-
scriptions to a charity or hospital, to which the company’s
employees are admitted if in ill-health. As a general rule
any expenses which benefit the workpeople and may be
regarded as a general addition to wages are allowed.

3. Trade subscriptions. Subscriptions to trade associa-
tions are now admitted if associations have entered into an
arrangement to pay tax direct on any excess of their receipts
over their admissible expenses. The net effect of this arrange-
ment is that tax on that part of the subscriptions which
represent expenditure not admissible is collected in one sum
from each association instead of from the individual members.

4. Law Charges incurred otherwise than in the collection