The Computation of Profit

Abstract

Until the passing of FA 1965, the taxation of companies was part of the income tax code which charged both individuals and corporations to tax. In 1965, corporation tax imposed a charge on the profits of companies distinct and separate from the income tax charge on individuals. In addition, when a company distributed profits to its shareholders it paid an additional amount of income tax. This latter feature is a characteristic of what is called the ‘classical system’ of corporation tax, but since it was shortlived (and in any case something of a novelty in UK taxation when it was introduced in 1965), the significance of the description ‘classical system’ for our purpose is to distinguish it from the ‘imputation system’ which was legislated for in 1972, and remains with us.