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Profits Tax - Voluntary receipts
Whether a
payment is voluntary or not --- that is whether it is made with or without legal
obligations --- does not affect its taxability.
In the case
CIR versus Falkirk Ice Rink Ltd. 51 TC 42, a members club used the
facilities of the taxpayer in the course of its business. The club
gave the taxpayer a sum to cover the additional cost of the
facilities. It was held that the receipt was made to supplement the
revenue of a trading company, and although voluntary, was chargeable
to tax.
If a
voluntary payment is made after the cessation of a trading activity,
it may be non-taxable. In the case Simpson versus John Reynolds & Co.
(Insurances) Ltd. 49 TC 693, a company of insurance brokers lost an
important client on a change of control of the client company which
undertook to pay
5,000
pounds by annual installments of 1,000
pounds
in recognition of the long period during which the taxpayer acted for
the client. It was held that the payments were gifts and not an
additional reward for services rendered and therefore not taxable.
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