How to Assess Haulage Profits for
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ADVICE to hauliers whose businesses are liable to be nationalized is contained in the first report of the central long-distance committee of the Road Haulage Association. The committee is collecting information on acquisitions by the British Transport Commission and will issue a series of reports.
Area committees have been appointed by members who are long-distance operators. Each area committee has elected two representatives to serve on the central committee, which has
appointed a technical sub-committee consisting of four operators, a solicitor, an accountant and a valuer. Practical help is being given to operators' whose undertakings are liable to be nationalized.
In arriving at the figure for the average profit, which, in assessing compensation for cessation of business, is to be multiplied by a certain number of years, the committee gives the following advice:— " First, take the profit in the audited accounts; adjust as for income-tax purposes in respect of items which may be of a capital character or not normal charges against revenue; add back to this figure depreciation as charged in the accounts, directors' remuneration in limited companies and, if applicable, any salary/ies charged by a sole owner or partners in individual businesses, together with bank or other financial costs.
Having arrived at this figure, deduct an agreed amount for management salary or salaries. This figure should be a reasonable management charge, having regard to the size and nature of the business; it may be based upon what will be agreed as the salary to be paid
to the existing directors/proprietors, should -they accept service with the I3.T.C., but this is not conclusive, since the duties required by the engagement under the B.T.C. may not be strictly comparable with those of management of a single unit.
" Deduct also a figure for depreciation, which we maintain should be computed. upon the written-down value of the vehicles comprising the fleet, ascertained in accordance with the formula laid down in the Transport Act. There will also be a deduction in respect of leasehold properties (a sum which will be dependent upon the length of the lease) and a small deduction in the case of freehold property. Finally, deduct per cent. on the "hard assets" to be acquired. . ."
The committee understands that the Commission is claiming that 10 per cent, must be deducted for profits tax. It is pointed out that this tax applies only to limited companies, and the deduction must be strenuously contested in all cases. As no profits tax applies to individuals in business, compensation to a limited-liability company Might be relatively much lower than that given to a private firm.
The report explains that for the purpose of arriving at the average profit 'the Commission will consider the deletion of the financial year in which some abnormal circumstance occurred. Operators can also apply to have the date of acquisition altered.
The committee assumes theta small operator whose business is well 'managed, and whose profits in the base period were stable and were likely to continue, will obtain the same treatment as the largest undertakings.