Finance Act, 1975

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Relief in respect of increase in stock values.

31.—(1) In this section—

“accounting period”, in relation to a company, means an accounting period determined in accordance with the provisions of section 54 of the Finance Act, 1920 , which ends on a date in the period from the 6th day of April, 1973, to the 5th day of April, 1975;

“company” means any body corporate resident in the State;

“trade” means a trade which is carried on in the State and which during an accounting period consists wholly or mainly of any of the following classes of trading operations—

(a) the manufacture of goods,

(b) the carrying out of construction operations within the meaning of section 17 of the Finance Act, 1970 ,

(c) farming, or

(d) the sale of machinery or plant (excluding vehicles suitable for the conveyance by road of persons) or goods to a person engaged in a trade consisting wholly or mainly of trading operations of a class specified in paragraph (a), (b) or (c) for use for the purposes of that trade;

“trading profits”, in relation to any trade, means the profits or gains of the trade computed in accordance with the rules applicable to Case I of Schedule D before the allowance of any deduction under section 64 of the Income Tax Act, 1967 ;

“trading stock”, in relation to any trade, has the same meaning as in section 62 of the Income Tax Act, 1967 , and in determining the value of a company's trading stock at any time for the purposes of a deduction under this section, to the extent that, at or before that time, any payments on account have been received by the company in respect of any trading stock, the value of that stock shall be reduced accordingly.

(2) Subject to the following provisions of this section, if—

(a) a company carries on in an accounting period a trade in respect of which it is within the charge to income tax under Case I of Schedule D, and

(b) the value of the company's trading stock at the end of the accounting period (in this section referred to as its “closing stock value”) exceeds the value of its trading stock at the beginning of the accounting period (in this section referred to as its “opening stock value”),

the company shall, in the computation for the purposes of income tax of its trading profits, be entitled to a deduction under this section by reference to the amount of that excess as if the deduction were a trading expense incurred in the accounting period; and in the

following provisions of this section the amount of that excess is referred to as the company's “increase in stock value”.

(3) The third Schedule shall have effect for the purpose of supplementing this section.

(4) (a) In any case where a company is entitled to a deduction under this section, that deduction shall be an amount equal to its increase in stock value in an accounting period less 20 per cent. of its trading profits for that period:

Provided that—

(i) in no case shall the amount of the deduction as so computed exceed the amount of the company's trading profits for that period,

(ii) the company's trading profits to be taken into account in computing a deduction shall be those profits before any deduction is made under this section or the Third Schedule, and

(iii) any deduction allowed under the provisions of this section in computing a company's trading profits for an accounting period shall not have effect for any purpose of the Income Tax Acts for any year of assessment prior to 1974-75 or later than 1975-76.

(b) There shall be made such reductions of assessments or repayments of tax as may in any case be required in order to give effect to this section.

(5) A company shall not be entitled to a deduction under this section in respect of an assessment unless it makes a claim before—

(a) the date on which the assessment becomes final and conclusive, or

(b) the expiry of the period of six months beginning with the date of the passing of this Act,

whichever is the later.

(6) Where under the provisions of this section an amount is deducted as an expense in computing trading profits for an accounting period for the purposes of income tax, that amount shall be similarly treated for the purposes of corporation profits tax.