CORPORATION PROFITS TAX. A tax on the profits of companies enjoying limited liability was introduced in the British Parliament in the Finance bill, 1920, and was passed into law in the Finance Act of that year. It met with slight opposition, partly because of the modesty of the rate, but the arguments advanced in support of the proposals were not limited to their effect in the production of revenue. It was pointed out that as the State conferred certain privileges upon companies with limited liability, such companies could properly be called upon to pay something to the State in return. It was also indicated that the tax would act to some extent as a corrective of the practice of the evasion of the super tax (a tax payable only by individuals) by the placing by private companies of their profits to reserve, instead of distributing them. The tax, therefore, was levied solely upon limited liability companies; it was levied with out reference to pre-war profits, and it was levied upon the profits whether those profits were distributed or not.
The provisions relating to the tax were contained in part V. of the Finance Act, 1g2o. The tax was charged as from Jan. 1, 1920, at the rate of Is. in the £ on the profits arising in any accounting period, of a British company carrying on any trade or business or any undertaking of a similar character, including the holding of investments. The tax was also imposed on the profits of foreign companies carrying on in the United Kingdom any trade or business, or any undertaking of a similar character, so far as those profits arose in the United Kingdom. The ex pression "company" was defined as "any body corporate so con stituted that the liability of its members is limited," but was not to include a company formed before the commencement of the Act whose assets consisted wholly of securities issued by a public authority, and formerly held by the persons by whom the com pany was formed. No tax was charged on the first f 50o a year of the profits. Mutual trading concerns, whose activities had not given rise to liability to income tax, were brought within the charge, but their taxable profits were to be ascertained on a special basis. Exemption for three years was given to building societies as well as to companies carrying on wholly in the United Kingdom gas, water, electricity, tramway, hydraulic power, docks, canal or railway undertakings, whose charges and dividends were limited by Act of Parliament. The amount of tax charged on any company was not to exceed 2S. in the £ on what remained after deducting from the profit the amount paid out in interest or dividends on debentures, preference shares, or permanent loans secured by mortgage or debentures, and repayable at not less than three months' notice. No company was assessable on income received from another company liable to be assessed in respect of that income, and a company holding all the share capital of another company might elect to have the profits of the two companies assessed together.
Assessment.—Generally speaking, the profits for assessment were to be calculated on the same basis as that adopted for in come tax, but the profits charged in each accounting period were to be the actual profits, and not the profits computed on an average of the previous three years, or on any other basis.
The Act made provision for certain deductions in arriving at the assessable profits, and also forbade certain deductions. Thus, interest on money borrowed for the business (except permanent loans and money borrowed from a person having a controlling interest in the company), rent of premises, royalties paid to a person who had not a controlling interest, shares of profits distributed to employees under a profit-sharing scheme, and not in respect to shares purchased by them, wear and tear, excess profits and mineral rights duty, and foreign and colonial taxes, were allowed as deductions. Royalties paid to a person having a controlling interest, interest on money borrowed from such a person, interest on permanent loans, dividends on distribution of profits, and remuneration in excess of f 1,000 a year of directors and managers who had a controlling interest in the company, were not allowed as deductions, and no deduction could be made in respect of any transaction which artificially reduced the amount of the taxable profits. The penalty for entering into fictitious or artificial transactions with a view to evading the tax, was a fine not exceeding f 500.
Unlike the income tax, which is assessed by bodies of local commissioners in the various districts throughout Great Britain, the Corporation Profits Tax was assessed by the commissioners of Inland Revenue, who were empowered, in the absence of a satisfactory return or information from the company, to make an assessment according to the best of their judgment. An appeal could be made against the amount of an assess ment to the general or the special commissioners of income tax, at the option of the company assessed, and an appeal from the decision of the commissioners could be taken to the courts on a point of law. Where a company was being wound up, the liqui dator was prohibited from distributing the assets until he had satisfied the commissioners of Inland Revenue that he had pro vided for the payment of any tax for which the company might be liable.
These provisions, like all revenue provisions, gave rise to legal questions as to the true construction of the words of the Act by which the charge was imposed, and the courts were called upon to give decisions on many points, notably as to whether certain companies were carrying on trade or business, or any under taking of a similar character. But the tax had a short life. By section 36 of the Finance Act, 1923, the rate of tax was reduced to 21%, and by section 34 of the Finance Act, 1924, the tax was brought to an end at June 3o, 1924. (R. N.) CORPS (pronounced cor as in French, from which it is taken, being a late spelling from Lat. corpus, a body ; cf. "corpse"), a word in very general use since the 17th century to denote a body of troops, varying from a few hundred to the greater part of an army. In a special sense "corps" is used as synonymous with "army corps" (corps d'armee) a grouping of several divisions. (See ARMY.) The word is applied to any organized body, as in corps diplomatique, the general body of foreign diplomatic agents accredited to any government (see DIPLOMACY) or corps de ballet, the members of a troupe of dancers at a theatre; so in esprit de corps, the common spirit of loyalty which animates any body of associated persons.