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Where Ignorance is Loss

22nd November 1946
Page 41
Page 41, 22nd November 1946 — Where Ignorance is Loss
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WITH changes continually taking VV place in income-tax assessment procedure, some references to the more recent provisions will be useful. These apply mostly to Schedule D (business profits: persons on own account). although some reference to Schedule E (employments) will require to be made.

Payments made for excess-profits tax and national defence contribution are allowable. Where Treasury tax reserve certificates are taken out in advance of tax payments, interest is payable, and this is not assessable to tax.

A war gratuity for service in the Armed Forces and certain other Services is outside tax law.

National Savings If an employer Makes a.contribution towards the purchase Of savings certificates for employees. some of this amonnt. is treated as a trading expense, usually one-tenth of the contribution being' allowed. Goods are sometimes given to employees and the value is not assessable. If, because' ofa shortage of goods, -savings certiflgates or other Government savings investments are given,• these are not taxable on the recipient. and 'the antount is treated as a trading expense of the employer and is allowable for tax.

Also subject to deduction as trading expenses. are certain items of expenditure in connection with scientific research, examples being salaries or fees of research workers, the cost of materials used in research, the cost of repairs and maintenance, and so forth.

Contributions even of a capital nature made to universities, colleges, etc., for technical education, if relating to the particular trade of the taxpayer, may be treated as trading expenses.

The term "machinery and plant" used in connection with depreciation allowances has a wide interpretation, and includes, for example, motor vehicles and fittings and fixtures. These allowances operate by yearly percentages and should. always be claimed. The extra +allowance, which has been one-fifth of the allowance, has become one-fourth, this being an addition to all basic rates. The basic rate for motor vehicles has been increased from 20 per cent. to 25 per cent. If machinery or plant be worked overtime or on shifts

(or motor vehicles worked more than in normal times), an additional allowance is usually permissible. For motor. vehicles a quarter over the usual allowance is obtained.

The foregoing considerations apply currently, but for the next and succeeding years them will be additional allowances.

One is an " initial allowance," of 20 per cent. of the capital expenditure when machinery, etc., is installed (new or, used), this .arising from the Income Tax Act, 1945. There will also be allowances for "industrial buildings," and certain capital expenditure on scientific research (e.g., pilot plants, laboratories, and other items) will be available against profits, by instalments spread over five years.

Social Insurance The employer's share of contributions paid under the present social insurance schemes is allowable as a trading expense; this arrangement will apply also to the increased contributions under the new. scheme. Employees will be allowed their share, whereas, formerly, only a flat rate of 11 per annum was awarded. On the other hand, pensions and benefits received (except maternity or death grant) will be assessable under Schedule E as earned income.—FIT.

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