Finance Act, 1958
|
THIRD SCHEDULE. Dividends Regarded as Paid out of Profits Accumulated Before Given Date. | ||
1. (1) Subject to the provisions of the next following paragraph, a dividend shall be regarded for the purposes of section 51 of this Act and of this Schedule as paid wholly out of profits accumulated before a given date (hereafter in this Schedule referred to as the relevant date)— | ||
(a) if it is declared for a period falling wholly before the relevant date, | ||
(b) if there are no profits of the company arising in the period beginning with the relevant date and ending with the date on which the dividend is payable, or | ||
(c) if, out of such profits of the company as arose in the said period beginning with the relevant date, no part is, having regard to paragraph 3 of this Schedule, available for payment of the dividend. | ||
(2) Subject as aforesaid, where, out of such profits of the company as arose in the said period beginning with the relevant date, some part is, having regard to paragraph 3 of this Schedule, available for payment of the dividend but the total amount distributed in payment of the net dividend on all the shares of the class in question exceeds the said part of the profits, the dividend shall be regarded for the said purposes as paid out of profits accumulated before the relevant date to an extent which is the same as the proportion which the excess bears to the said total amount. | ||
(3) For the purposes of this Schedule a dividend which is declared for a period falling partly before the relevant date, and partly after, shall be regarded as consisting of two dividends respectively declared for the two parts of the period and of amounts proportionate to those parts. | ||
2. (1) Notwithstanding the provisions of the foregoing paragraph, a dividend shall not be regarded as paid to any extent out of profits accumulated before the relevant date— | ||
(a) if it became payable within one year from that date, and | ||
(b) if in the opinion of the Special Commissioners the annual rate of dividend on the shares in question in the said year— | ||
(i) is not substantially greater than the annual rate of dividend on those shares in the period of three years ending on the relevant date, or | ||
(ii) in a case where the shares in question were acquired in the ordinary course of a business of arranging public issues and placings of shares, represents a yield on the cost to the person receiving the dividend which is not substantially greater than the yield obtainable by investing in comparable shares the prices of which are quoted on stock exchanges in the State. | ||
(2) For the purposes of clause (b) of the foregoing subparagraph the Special Commissioners shall have regard to all dividends paid on the shares in the respective periods, to any share-issue made in those periods to holders of the shares and, in a case under subclause (i) of the said clause (b) where the shares were not in existence three years before the relevant date, to the dividends paid on, and any share-issue made to holders of, any shares surrendered in exchange for the first-mentioned shares or in right of which the first-mentioned shares were acquired, and shall take such averages and make such adjustments as may appear to them to be required for a fair comparison. | ||
3. (1) The part of the profits of the company arising in the period beginning on the relevant date and ending on the date on which a dividend is payable which is available for payment of the dividend shall be determined as follows. | ||
(2) There shall be deducted from the said profits such amount, whether fixed or proportionate to the amount of the profits, as in the opinion of the Special Commissioners ought justly and reasonably to be treated as set aside for payment of dividends on any other class of shares in the company, having regard to the respective rights attaching to the shares and on the assumption that the total amount available for distribution by way of net dividend on all the shares in the company over any period will be proportionately greater or less than the profits of the company arising in the period beginning on the relevant date and ending on the date on which the dividend mentioned in the foregoing subparagraph is payable, according as the first-mentioned period is longer or shorter than the second-mentioned period. | ||
(3) In a case where, in the period beginning on the relevant date and ending on the date on which the dividend is payable, no previous dividend became payable on the shares of the class in question, the whole of the profits of the company arising in the period, less any deduction to be made under the last foregoing subparagraph, shall be regarded as available for payment of the dividend. | ||
(4) If any previous dividend became payable in the said period on the same shares, there shall be determined in accordance with the foregoing paragraphs the extent, if any, to which that previous dividend is to be regarded as paid out of profits accumulated before the relevant date, and the profits of the company arising in the said period, less any deduction to be made as aforesaid, shall be regarded as primarily available for payment of the net amount of that previous dividend so far as it is not regarded as paid out of profits accumulated before the relevant date and only such balance, if any, as remains shall be regarded as available for payment of the later dividend. | ||
(5) Where under subparagraph (2) of this paragraph it falls to the Special Commissioners to determine what should be set aside for payment of dividends on shares of any class, and dividends on shares of that class have been treated under this Schedule as paid to any extent out of profits accumulated before the relevant date, the Special Commissioners may take that fact into account and reduce the amount to be so set aside accordingly. | ||
4. (1) For the purposes of this Schedule the profits of a company arising in a given period shall be determined as follows. | ||
(2) The said profits shall be the income of the company for the period diminished by— | ||
(a) the income tax actually borne by the company for any year of assessment in the said period (including any sur-tax borne by the company under section 21 of the Finance Act, 1922 , and the First Schedule to that Act), and | ||
(b) the corporation profits tax payable by the company for any accounting period in the said period: | ||
Provided that where relief has been afforded to the company under section 12 of the Finance Act, 1950 (No. 18 of 1950), section 14 of the Finance Act, 1955 (No. 13 of 1955) or section 44 of this Act, references in this subparagraph to tax actually borne or to tax payable shall be construed as references to the tax which would have been borne or payable if that relief had not been given. | ||
(3) In ascertaining for the purposes of this paragraph the amount of income tax and corporation profits tax by which the income of the company for the period is to be diminished, any tax on the amount to be deducted under clause (d) of subparagraph (3) of paragraph 5 of this Schedule shall be left out of account. | ||
5. (1) For the purposes of this Schedule the income of the company for a given period shall be determined as follows. | ||
(2) There shall be computed the aggregate amount— | ||
(a) of any profits or gains arising in the period from any trade carried on by the company computed in accordance with the provisions applicable to Case I of Schedule D, and | ||
(b) of any income for any year of assessment in the period (computed in accordance with the provisions of the Income Tax Acts) other than profits or gains arising from any such trade. | ||
(3) There shall be deducted from the said aggregate amount the sum of the following amounts, that is to say— | ||
(a) any loss sustained by the company in the period in any such trade (computed in the same manner as profits or gains under the provisions applicable to Case I of Schedule D), | ||
(b) any allowances in respect of any such trade under Rule 6 of the Rules applicable to Cases I and II of Schedule D, subsection (3) of section 5 or section 6 of the Finance Act, 1946 (No. 15 of 1946), Part V of the Finance Act, 1956 (No. 22 of 1956), Part IV of the Finance (Miscellaneous Provisions) Act, 1956 (No. 47 of 1956), or Part V of the Finance Act, 1957 (No. 20 of 1957), for any year of assessment in the period, | ||
(c) any payments made by the company in any year of assessment in the period to which Rule 19 or Rule 21 of the General Rules applies, other than payments which are deductible in computing the profits or gains or losses of a trade carried on by it, and | ||
(d) if the company is not engaged in carrying on such a trade as is mentioned in subsection (1) of section 51 of this Act and has received in a year of assessment in the period a dividend (being a dividend which, on or after the 19th day of June, 1958, the company became entitled to receive) which, if the company had been engaged in such a trade, would have been required by the said subsection (1) to be brought into account to any extent as mentioned therein, such amount as would, after deduction of income tax at the rate authorised to be deducted by Rule 20 of the General Rules, be equal to the amount which would have been so required to be brought into account, | ||
and the balance shall be the income of the company for the period. | ||
6. Any reference in paragraph 4 or 5 of this Schedule to an amount for a year of assessment in the period in question shall be taken as a reference to the full amount for any year of assessment falling wholly within the period and a proportionate part of the amount (on a time basis) for any year of assessment falling partly within that period, and the reference therein to corporation profits tax payable for any accounting period in the said period shall be construed in a corresponding manner. |