§ Sir S. Reedasked the Chancellor of the Exchequer whether the computation for the purposes of Excess Profits Tax of the average capital employed in a trade or business must in every case conform strictly to the provisions of the Seventh Schedule of the Finance (No. 2) Act, 1939?
§ Sir K. WoodThe provisions of the Seventh Schedule of the Finance (No. 2) Act, 1939, to which my hon. Friend refers, constitute a statutory rule for the computation of capital employed and have therefore been drawn so as to prescribe a strict standard of measurement. But in actual practice the Revenue authorities would not insist on a meticulous calculation in conformity with the schedule unless it would be in the interest of the taxpayer or the amounts involved were so large that appreciable revenue was at stake. Normally, where capital is employed for part only of an accounting period, the Revenue would be content to accept calculations based on the number of complete months. Moreover, in the case of any element of the capital computation that fluctuates throughout the year, the Revenue would be willing, in cases where such a course gives substantial accuracy, to take the mean capital of the period by reference to the amounts at the beginning and end of the year as measuring the average capital. If any taxpayer finds difficulty in working out figures of average capital, I would suggest that he should communicate with his Inspector of Taxes who will be happy to assist him in the matter.