§ Fourthly, I can now announce another small relief which was urged upon me last year. For Profits Tax purposes there has always been a restriction on the amounts that might be deducted for the remuneration of the directors of director-controlled companies. This is necessary, so that the directors may not take out in the form of remuneration what was really the return on the capital invested in the business and ought to bear Profits Tax.
§ The maximum amounts at present allowable are fixed by a rather complicated scale with alternative limits. The first limits which apply to the larger companies are 15 per cent. of the companies' profits, subject to a maximum of £15,000. That is the total for all the controlling directors. The other scale, which, in effect, applies to the smaller companies, depends upon the number of full time working directors and runs from £2,500 for one such director to a maximum of £7,000 for four or more such directors.
§ I have come to the conclusion that there is now a good case for a modest increase in this scale, which I propose to vary so that it becomes £3,000 for one full-time working director, £5,000 for two, £7,000 for three and £9,000 for four or more such directors. The alternative limit of 15 per cent. of the profits, subject to a ceiling of £15,000, will remain unchanged. This relief will cost nothing this year and about £3 million in a full year.