Under Peruvian law the Respondent Company was bound to pay its employees in Peru prescribed compensation payments upon the termination of their services with the Company, subject to the fulfilment by the employee of certain conditions. The amount to be paid depended on (a) length of service and (b) rate of pay at the end of the period of service, except that a reduction in pay would not affect the amount to which an employee was entitled by reference to the period of service already performed. On appeal against assessments to Income Tax on the Company made under Case I of Schedule D for the years 1947-48 to 1951-52 inclusive, it was contended on behalf of the Company that upon proper principles of commercial accountancy amounts of compensation calculated to have accrued due to each employee from year to year as deferred remuneration should be allowed as a deduction. The Special Commissioners held that it was a matter of correct accountancy practice to make provision in the accounts for the sums in question, and allowed the appeal.
Citations:
[1956] UKHL TC – 36 – 602
Links:
Jurisdiction:
England and Wales
Income Tax
Updated: 04 May 2022; Ref: scu.560143