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However consistent 10 The Principle of Sharkey v. Werhner According to the principle of Sharkey v.
Where a trader Has taken part of his stock for his own use,
enjoyment or consumption
enjoyment Instead of being sold,
The market value of that stock at the time of
such disposition is treated as receipt in his
trading account for tax purposes (Sharkey v.
Wernher (1955) 35 TC 275).
11 Principle of Sharkey v Wernher If a sole proprietor or partner
If sole Takes goods from trading stock for
purposes other than by sale in the ordinary
course of his retailing business, The IRD will apply the principle of Sharkey
12 Extension of the Sharkey v
Wernher The Sharkey v. Wernher principle was
extended in Petrotim Securities Ltd. v. Ayres
(1963) 41 TC 389.
A share-dealing company sold its investments
which were its trading stock to its parent
company below the market value.
Held: the market value should be substituted
for the agreed sale price.
13 IRD’s Practice The IRD applies the Petrotim Securities
decision to extend the Sharkey v. Wernher
principle to cases where
The stock is disposed other than in the normal
course of trade.
Hence it is possible to apply this rule to cases Where a trader makes a sale at a very low
price to a member of his family or
price A trading transaction between associated
companies not at arm's length.
companies 14 Extension of Sharkey v Wernher Where the market value has been substituted
for the agreed sale price.
sale The purchaser's purchase price should be
substituted by the market value also for tax
purposes (Ridge Securities Ltd. v. CIR (1963)
44 TC 373).
44 15 Services The Sharkey v. Wernher
principle would not apply to
services rendered by
professionals (Mason v.
16 Change of Intention Where a trader transfers his current asset
to fixed asset, i.e., he has a change in his
intention to hold the long-term instead of
A notional profit/loss (i.e. the market
value on the date of change of intention
less the cost of the asset) will arise. In
In general, principle do not apply.
17 Computation Pro Forma of Profit Tax 18 Computation Pro Forma of Profit Tax Con’t
Computation 35% 16.5% 15% 19 PROVISIONAL PROFITS TAX
The assessor is empowered to issue a
provisional tax return (s 51 (1) ) to any person
for the purpose of collecting information &
issuing a demand for provisional profits tax (s
63L). In case of a continuing business, the amount of
provisional profits for a YA is usually based on
the assessable profit (before set-off of loss b/f)
of the preceding year.
preceding 20 Example Q Ltd commenced business 10 years ago &
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This document was uploaded on 03/16/2014.
- Spring '14