Can arrangements designed to reduce a business’s tax bill still be wholly and exclusively for the purposes of its trade? HMRC seems not to think so, writes Ross Birkbeck (Old Square Tax Chambers).
The wholly and exclusively test
ITTOIA 2005 s 34 and CTA 2010 s 54 are a key mechanism for controlling the amount of expenses a business can deduct when calculating its profits for tax purposes. They use identical wording in regard to income tax and corporation tax respectively: to be deductible an expense must be ‘incurred wholly and exclusively for the purposes of the trade’.
The way to approach this key phrase has been addressed by the courts on many occasions. A good modern example is in Ingenious GamesLLP v HMRC [2019] STC 1851 (at para 461 where the Upper Tribunal (UT) confirmed the approach of the First-tier Tribunal (FTT)) where the court summarised...
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Can arrangements designed to reduce a business’s tax bill still be wholly and exclusively for the purposes of its trade? HMRC seems not to think so, writes Ross Birkbeck (Old Square Tax Chambers).
The wholly and exclusively test
ITTOIA 2005 s 34 and CTA 2010 s 54 are a key mechanism for controlling the amount of expenses a business can deduct when calculating its profits for tax purposes. They use identical wording in regard to income tax and corporation tax respectively: to be deductible an expense must be ‘incurred wholly and exclusively for the purposes of the trade’.
The way to approach this key phrase has been addressed by the courts on many occasions. A good modern example is in Ingenious GamesLLP v HMRC [2019] STC 1851 (at para 461 where the Upper Tribunal (UT) confirmed the approach of the First-tier Tribunal (FTT)) where the court summarised...
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If you do not subscribe but are a registered user, please enter your details in the following boxes:
