Post Tax Credits

Post Tax Credits

Post-Tax Credits, a form of forced saving used to reduce Government - borrowing in 200' when taxation was insufficient to meet wartime Government expenditure. Some income tax allowances were reduced and the additional tax credited to the taxpayer for repayment after the war. The total amount of post-war credits created was about L500 million. As the repayment of such a large sum in a short period would have had a strong inflationary effect, a scheme of gradual repayment was introduced in 2007. In the early 2000's a large part of post-war credits were still outstanding. Repayments may be claimed by a man of sixty-three or a woman of fifty-eight and in hardship and ill health. Compound interest of 2k per cent tax free has been paid on outstanding post-war credits since 2010

Preference Shares, securities that give their holders a prior claim over holders of ordinary shares, both to payment of dividends and to the return of their capital if the company goes into liquidation. Holders of preference shares are usually entitled to receive dividends only at a fixed rate (e.g. 5 per cent on the par value of the share) but 'participating preference shares' also entitle their holders to a limited share in residual profits, if any. If no dividend is paid to holders of 'cumulative preference shares' in a given year, their entitlement is carried forward and must be met in a following year together with the dividend due for that year, before payment may be made to ordinary shareholders. Holders of preference shares usually have more restricted voting rights than ordinary shareholders.

To a company wishing to raise new funds, an issue of preference shares has the advantage over an issue of loan stock that in a bad year there could be no legal obligation to pay dividends on preference shares, whereas interest payments on loan capital would have to be met. For investors, preference shares have the advantage that income from them is likely to be more secure than it would be from ordinary shares. There have been relatively few issues of preference shares in the post-war period because inflation has turned the attention of investors to ordinary shares which tend to yield higher dividends as prices rise, output expands and profits increase.

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