A company was required under Peruvian law to make compensation payments to employees leaving its service. The amount of compensation was dependant on the length of service and rate of pay at the date of leaving. The company claimed a deduction for the accrued compensation due each year. The Inland Revenue rejected the claim.
It was held by the House of Lords that although there was nothing in law to prevent such a deduction, the company’s calculation had not been calculated with sufficient accuracy to enable a deduction to be made.