Finance Act, 1942

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Standard profits of a company succeeding to the business of another company.

13.—(1) Where—

(a) a company (in this section referred to as the successor company) has succeeded to the whole of the trade or business carried on, immediately before such succession by another company (in this section referred to as the predecessor company), and

(b) the successor company was incorporated for the purpose of so acquiring and taking over the said trade or business so carried on by the predecessor company, and

(c) the successor company carries on, after such succession, the trade or business so carried on by the predecessor company, and

(d) the successor company has not had three consecutive trade years the last of which ended on the 31st day of August, 1939,

the following profits may, on the application of the successor company, be treated as profits of the successor company for the purpose of computing the standard profits of that company, that is to say, the profits of any trade year or trade years which might have been brought into account for the purpose of ascertaining the standard profits of the predecessor company if the said succession had not occurred and the predecessor company had continued to carry on the said trade or business and had become chargeable to excess corporation profits tax in respect of the profits of that business.

(2) Where an application under the foregoing sub-section of this section is made and effect is given to that application, the following provisions shall apply and have effect in relation to the ascertainment, for the purposes of a charge to excess corporation profits tax, of the profits of the successor company arising in any accounting period or part of an accounting period, that is to say:—

(a) section 41 of the Finance Act, 1941 (No. 14 of 1941), as amended by this Act, shall not apply;

(b) if the successor company is a company the directors whereof have a controlling interest therein, the total amount of deductions to be allowed in respect of the remuneration of the directors shall not exceed the total amount of the deductions allowed in respect of the remuneration of directors in the ascertainment of the standard profits of the successor company;

(c) the amount of any deduction on account of wear and tear or renewals or obsolescence of any machinery or plant acquired by the successor company from the predecessor company shall, where necessary, be so reduced as to secure that such deduction is not greater than the deduction which would have been allowed in respect of that machinery or plant in ascertaining, for the purposes of a charge to excess corporation profits tax, the profits of the predecessor company if that company had continued to carry on, during the relevant accounting period or part of an accounting period, the trade or business mentioned in the said foregoing sub-section and had retained the said machinery and plant for the purposes of the said trade or business as so carried on.

(3) This section shall apply and have effect in respect of every accounting period beginning on or after the 1st day of January, 1941, and in respect of the part of any accounting period beginning before that date which is subsequent to the 31st day of December, 1940.