Finance Act 1946

37 Relief from excess profits tax for terminal expenses.

(1) Subject to the provisions of this section, if any person who, in a chargeable accounting period ending on the thirty-first day of December, nineteen hundred and forty-six, carried on a trade or business the profits of which for any chargeable accounting period are charged to excess profits tax, makes a claim for relief under this section and proves that, within the period specified in subsection (2) of this section, any terminal expenses, as defined in subsection (3) of this section, have been incurred in connection with the trade or business, he shall be entitled to require—

(a) in the case of costs of deferred repairs and renewals, that the profits of the trade or business for the accounting period to which in the opinion of the Commissioners the costs are reasonably and properly attributable, or, where those costs are in their opinion reasonably and properly attributable to more than one accounting period, the profits of the trade or business for each of the accounting periods, shall, for the purposes of excess profits tax, be treated as reduced by the amount of the said costs, or the part of that amount which is, in the opinion of the Commissioners, reasonably and properly attributable to that period, as the case may be ;

(b) in the case of rehabilitation costs, that the profits of the trade or business for the chargeable accounting period ending on the said thirty-first day of December, shall, for the purposes of excess profits tax, be treated as reduced by the amount of the said costs.

(2) The period referred to in subsection (1) of this section is the year nineteen hundred and forty-seven:

Provided that if the person making the claim produces to the Commissioners before the end of March, nineteen hundred and forty-eight, particulars of work required to be done, as at the said thirty-first day of December, and satisfies them that it was not possible for that work to be done before the end of the year nineteen hundred and forty-seven, the Commissioners may treat the said period as extended, in relation to any terminal expenses incurred on doing that work, until the end of the year nineteen hundred and forty-eight or,-if the circumstances so require, until such later date as the Commissioners may allow, being a date not later than the end of the year nineteen hundred and forty-nine.

(3) For the purposes of this Part of this Act, the expression " terminal expenses " means expenses incurred by the person carrying on the trade or business, consisting of costs of deferred repairs and renewals, as defined in subsection (4) of this section, and rehabilitation costs, as defined in subsection (5) of this, section:

Provided that so much of any expenses as has been or is to be met directly or indirectly by the Crown or by any government or public or local authority, whether in the United Kingdom or elsewhere, or by any person other than the person carrying on the trade or business, shall be left out of account.

(4) For the purposes of this section, the expression " costs of deferred repairs and renewals" means expenditure on repairs and renewals necessary to maintain assets in an effective working condition, being repairs and renewals which have been deferred by reason of conditions prevailing as a consequence of the war and which would, if they had not been deferred, have been carried out in an accounting period constituting or including a chargeable accounting period :

Provided that the said expression does not include any expenditure which, if the repairs and renewals had not been deferred, would not have fallen to be allowed in computing for the purposes of excess profits tax the profits arising from the trade or business in an accounting period constituting or including a chargeable accounting period.

(5) For the purposes of this section, the expression " rehabilitation costs " means—

(a) expenditure on the removal of works designed to afford , protection from hostile attack ;

(b) where the trade or business was, as a consequence of the war, removed in whole or in part to a different place, expenditure on again removing the trade or business or that part thereof back to the place where it was carried on before the first mentioned removal, or, where the trade or business or that part thereof is not removed back to that place, expenditure on removing it to some other place up to the amount which would have been incurred in removing it back to that place ;

(c) where any buildings, plant, machinery or other physical assets held for the purposes of the trade or business were, either as regards lay-out or otherwise, altered so as to adapt them to conditions prevailing as a result of the war, any expenditure incurred on again altering the assets so as to readapt them to peace-time requirements, except so far as that expenditure consists of costs of deferred repairs and renewals or represents an improvement of the character or condition of the assets as compared with their character and condition before the first mentioned alteration.

A trade or business shall be treated for the purposes of paragraphs (b) and (c) of this subsection as continuing to be the same trade or business notwithstanding any change in the persons carrying it on.

(6) Where an accounting period falls partly before-and partly after the end of the year nineteen hundred and forty-six, all terminal expenses incurred in that accounting period which would, apart from this subsection and subsection (2) of section thirty-three of the [3 & 4 Geo. 6. c. 29.] Finance Act, 1940 (which relates to the spreading of deductions over more than one accounting period), be allowable as deductions in computing the profits thereof shall be treated for the purposes of subsection (1) of this section as if they were expenses incurred after the end of that year, and where a claim is made for relief under this section, no deduction in respect of any terminal expenses to which the preceding provisions of this subsection apply shall be allowed otherwise than under subsection (1) of this section from, or in computing the profits of, any accounting period or chargeable accounting period.

(7) Subsection (2) of section thirty-three of the Finance Act, 1940 (which relates to the spreading of deductions over more than one accounting period) shall not .apply in relation to any terminal expenses incurred in any accounting period beginning at or after the end of the year nineteen hundred and forty-six.

(8) Where relief is claimed under this section in respect of rehabilitation costs and the person making the claim is entitled for the purposes of excess profits tax to an allowance under paragraph 3 of Part I of the Seventh Schedule to the Finance (No. 2) Act, 1939, or subsection (1) of section thirty-three of the Finance Act, 1940 (which relate to exceptional depreciation allowances) and that allowance is greater than it would have been if the work which was the subject of the rehabilitation costs had been completed on the thirty-first day of December, nineteen hundred and forty-six, the relief allowable under this section in respect of those costs shall be reduced by the amount of the excess.

(9) Where the person who, in a chargeable accounting period ending on the thirty-first day of December, nineteen hundred and forty-six, carried on a trade or business is a body corporate and was in that period a member of a group of companies—

(a) any claim under this section shall be made and be made only, by the principal company of the group ;

(b) all terminal expenses incurred after a change in the identity of the group or after the body corporate who carried on the trade or business has ceased to be a member of the group shall, be left out of account; and

(c) in the case of costs of deterred repairs and renewals, so much of the expenses as, in the opinion of the Commissioners, is reasonably and properly attributable-to an accounting period during which that body corporate was not a member of the group shall be left out of account.

(10) Where the person who, in a chargeable accounting period ending on the thirty-first day of December, nineteen hundred and forty-six, carried on a trade or business is a body corporate and was not in that period, but subsequently becomes, a member of a group of companies, all terminal expenses incurred after the body corporate becomes a member of the group shall be left out of account.

(11) Where the person who, in a chargeable accounting period ending on the thirty-first day of December nineteen hundred and forty-six, carried on a trade or business, is a body corporate and was not in that period, but was previously, a member of a group of companies, so much of any costs of deferred repairs and renewals as, in the opinion of the Commissioners, is reasonably and properly attributable to an accounting period during which that body corporate was a member of the group shall be left out of account.