J. & P. Hutchison v. Inland Revenue

J. & P. Hutchison, shipowners, Glasgow, appellants , being dissatisfied with a determination of the Commissioners for the General Purposes of the Income Tax Acts at Glasgow, assessing the appellants to excess profits duty for the accounting period of six months ending 31st March 1915, appealed by way of Stated Case, in which S. W. Bensted, Surveyor of Taxes, Glasgow, was respondent .

…. 4. The Commissioners were of opinion that the mode of computing the capital employed in the appellant's business adopted by the surveyor was correct and in accordance with the provisions of the Finance (No. 2) Act 1915, and they accordingly confirmed the assessment and dismissed the appeal.”

The following were referred to:—The Finance (No. 2) Act 1915 (5 and 6 Geo. V, cap. 89), sec. 38 (1) and (2), sec. 40 (2), sec. 41 (1) and (3), the Fourth Schedule, Part II, pars. 1, 2, and 4, and Part III, par. 1; the Finance Act 1916 (6 and 7 Geo. V, cap. 24), sec. 52; and the Finance Act 1917 (7 and 8 Geo. V, cap. 31), sec. 26 (5) ( b ).

It appears that the appellants did put additional capital into their business during the accounting period. In computing the deduction to which the employment of this additional capital entitles the appellants, the surveyor has based their pre-war Page: 116 ↓

It may be noted that there is a similar capital average required in order to arrive at the pre-war standard of profits in cases in which there has not been even one full pre-war year of trade. In such cases the statutory percentage is applied to “the average amount of capital employed during the accounting period”—Fourth Schedule, Part II, paragraph 4. Such average would in like manner be struck by ascertaining the amounts actually employed from time to time, and striking an average by reference to the amounts and dates.