Direct Tax Acts, Finance Act 2018

81 General rule as to deductions
ITA67 s57 and s61; FA69 s65(1) and Sch 5 PtI; FA74 s42(1); FA97 s146(1) and Sch9 PtI par1(3); FA05 s48(1); FA07 s37; F(No. 2)A08 s23; FA10 s159 and Sch 4(1)(a)

(1) The tax under Cases I and II of Schedule D shall be charged without any deduction other than is allowed by the Tax Acts.

(2) Subject to the Tax Acts, in computing the amount of the profits or gains to be charged to tax under Case I or II of Schedule D, no sum shall be deducted in respect of -

(a) any disbursement or expenses, not being money wholly and exclusively laid out or expended for the purposes of the trade or profession;

(b) any disbursements or expenses of maintenance of the parties, their families or establishments, or any sums expended for any other domestic or private purposes distinct from the purposes of such trade or profession;

(c) the rent of any dwelling house or domestic offices or any part of any dwelling house or domestic offices, except such part thereof as is used for the purposes of the trade or profession, and, where any such part is so used, the sum so deducted shall be such as may be determined by the inspector and shall not, unless in any particular case the inspector is of the opinion that having regard to all the circumstances some greater sum ought to be deducted, exceed two-thirds of the rent bona fide paid for that dwelling house or those domestic offices;

(d) any sum expended for repairs of premises occupied, or for the supply, repairs or alterations of any implements, utensils or articles employed, for the purposes of the trade or profession, over and above the sum actually expended for those purposes;

(e) any loss not connected with or arising out of the trade or profession;

(f) any capital withdrawn from, or any sum employed or intended to be employed as capital in, the trade or profession;

(g) any capital employed in improvements of premises occupied for the purposes of the trade or profession;

(h) any interest which might have been made if any such sums as aforesaid had been laid out at interest;

(i) any debts, except bad debts proved to be such to the satisfaction of the inspector and doubtful debts to the extent that they are respectively estimated to be bad and, in the case of the bankruptcy or insolvency of a debtor, the amount which may reasonably be expected to be received on any such debts shall be deemed to be the value of any such debts;

(j) any average loss over and above the actual amount of loss after adjustment;

(k) any sum recoverable under an insurance or contract of indemnity;

(l) any annuity or other annual payment (other than interest) payable out of the profits or gains;

(m) any royalty or other sum paid in respect of the user of a [patent;]1

[(n) without prejudice to the preceding paragraphs any consideration given for goods or services, or to an employee or director of a company, which consists, directly or indirectly, of shares in the company, or a connected company (within the meaning of section 10), or a right to receive such shares, except to the extent -

(i) of expenditure incurred by the company on the acquisition of the shares at a price which does not exceed the price which would have been payable, if the shares were acquired by way of a bargain made at arm’s length, [...]3

(ii) where the shares are shares in a connected company, of any payment by the company to the connected company for the issue or transfer by that company of the shares, being a payment which does not exceed the amount which would have been payable in a transaction between independent persons acting at arm’s [length, or]4]2

[(iii) of other—

(I) expenditure incurred, or

(II) payment made to the connected company,

by the company in connection with the right to receive such shares which is incurred or, as the case may be, made for bona fide commercial purposes and does not form part of any scheme or arrangement of which the main purpose or one of the main purposes is the avoidance of liability to income tax, corporation tax or[capital gains tax;]6]5

[(o) any sum paid or payable under any agreement or understanding whereby a person is obliged to make a payment to a connected person resident in any territory outside the State for an adjustment made, or to be made, to the profits of the connected person for which relief may be afforded under the terms of an arrangement entered into by virtue of subsection (1) or (1B) of section 826, or for a similar adjustment made to the profits of a connected person resident in [a territory in respect of which there are not for the time being in force any arrangements providing for such relief.]8]7.

[(3) (a) In respect of a company -

(i) interest payable by the company, and

(ii) expenditure on research and development incurred by the company,

shall not be prevented from being regarded for tax purposes as deductible in computing profits or gains of the company for the purposes of Case I or II of Schedule D by virtue only of the fact that for accounting purposes they are brought into account in determining the value of an asset.

(b) Any amount shall not be regarded by virtue of paragraph (a) as deductible in computing profits or gains of a company for the purposes of Case I or II of Schedule D for an accounting period to the extent that -

(i) a deduction has been made in respect of that amount in computing such profits or gains for a previous accounting period, or

(ii) the company has benefited from a tax relief under any provision in respect of that amount for a previous accounting period.]9

Go to Revenue Guidance Notes on TCA

Amendments

1 Substituted by FA05 s48 and applying as respects any period of account beginning on or after 1 January 2005

2 Inserted by FA05 s48 and applying as respects any period of account beginning on or after 1 January 2005

3 Deleted by FA07 s37 and applying as respects accounting periods ending on or after 1 February 2007

4 Substituted by FA07 s37 and applying as respects accounting periods ending on or after 1 February 2007

5 Inserted by FA07 s37 and applying as respects accounting periods ending on or after 1 February 2007

7 Inserted by F(No. 2)A08 s23 - see note below

8 Inserted by FA10 s159 and Sch 4(1)(a) and having effect as on and from the passing of FA10 - 3 April 2010

6,9 Substituted by F(No. 2)A08 s23 - Punctuation change - see note below

Note on F(No. 2)A08 Changes

F(No. 2)A08 s23 applies in respect of any sum paid or payable -

(i) in an accounting period ending on or after 20 November 2008, or

(ii) in a basis period for a year of assessment where that basis period ends on or after 20 November 2008.

For the above purposes, “basis period” means the period on the profit or gains of which income tax for the year of assessment is to be finally computed under the income tax Acts.

Case Law

Whether deductions available in respect of wages in relation to taxpayer’s sister, who was his employee during the relevant tax years of assessment – 13TACD2016

Taxpayers acquiring interest in leasing partnerships and whether expenditure of capital or revenue nature and incurred wholly and exclusively for purposes of trade – Revenue and Customs Commissioners v Investec Asset Finance plc and another [2018] UKUT 69 (TCC)

Case I - deductible expenditure

Writer seeking to claim deduction in respect of moving boat to South of France, mooring costs and costs of living on boat. Huhtala v Revenue and Customs Commissioners

Payments made to both employee benefit trust and to family benefit trust were made for the benefit of the employees and were wholly and exclusively expended for the purposes of the taxpayer company’s trade – Sempra Metals Ltd v Revenue and Customs Commissioners – [2008] STC (SCD) 1062

Whether motor rallying expenditure incurred wholly and exclusively for purposes of taxpayers’ trade. McQueen v Revenue & Customs Commissioners – [2007] STC (SCD) 457

Expenditure on inserting polyurethane inside existing metal gas pipes was of a revenue nature. Transco plc v Diall. [2002] SpC 310.

Interest on loan to redeem preference shares. Sean Mac Aonghusa (Inspector of Taxes) v Ringmahon Company. Supreme Court 29 May 2001.

Fines disallowable, but associated costs were allowable – McKnight (HMIT) v Sheppard [1999] STC 669 Accurate provisions for foreseen losses on long-term contracts can be deductible – Herbert Smyth v Honour [1999] STC 173

A payment to cancel an onerous trading arrangement is likely to be revenue – Vodaphone Cellular Ltd and Ors v Shaw (HMIT) [1997] STC 734

The deductibility of exchange losses on borrowings taken out to finance the acquisition of a capital asset – TG Brosnan (Inspector of Taxes) v Mutual Enterprises Ltd. [1997] ITR Vol 5 page 138

Severance payments to employees on closure of a factory were deductible. Hong Kong case. CIR v Cosmotron Manufacturing Co Ltd [1997] STC 1134.

Exclusivity payments were treated as deductible. Dolan (Inspector of Taxes) v AB Co. Ltd. [1968] ITR Vol 2 page 515. CLTP 4.4.5

Expenditure on the preparation of a quarry regarded as revenue – Milverton Quarries Ltd v The Revenue Commissioners [1959] ITR Vol 2 page 382 – CLTP 4.4.3

Repairs to a storm damaged weigh bridge house allowable as revenue – JT Hodgins (Inspector of Taxes) v Plunder & Pollak (Ireland) Ltd [1955] ITR Vol 2 page 267 – CLTP 4.2.2

Compensation costs paid in defending rights to construct a factory were revenue in nature. WJ Davis(Inspector of Taxes) v X Ltd. [1946] ITR Vol 2 page 45. CLTP 4.4.2.

Expenses incurred in promoting a Bill in the Oireachtas are tax deductible. McGarry (Inspector of Taxes) v Limerick Gas Committee. [1932] ITR Vol 1 page 375. CLTP 4.1.1

Taxpayer actor renting flat under tenancy agreement for duration of stage production and whether taxpayer’s accommodation costs incurred ‘wholly and exclusively’ for purposes of his profession. Revenue and Customs Commissioners v Healy – [2014] STC 384

Case I - non-deductible expenditure

Whether expenditure on goodwill deductible in computing profits. Greenbank Holidays Ltd v Revenue and Customs Commissioners [2011] STC 1582

Whether expenses incurred in connection with planning appeal of a revenue or capital nature. Markets South West (Holdings) Ltd v Revenue and Customs Commissioners [2011] STC 1469

Whether write-down of expenditure on residential property and Payment in kind to employee by way of bonus of residential property deductible in computing profits - Lion Co v R&CC [2010] SFTD 454

Taxpayer made payment in commutation of right to annuity and whether on capital or revenue account – Parnalls Solicitors Ltd v R&CC [2010] SFTD 284

Payments made by firm to partners withdrawing from the firm was chargeable to income tax and not deductible in computing the profits of the partnership – Morgan v Revenue and Customs Commissioners; Self v Revenue and Customs Commissioners – 2009 SFTD 160

Whether Currency losses on swaps under specific UK law were deductible. Prudential v Revenue and Customs Commissioners [2008] STC 2820

Whether provision made by company in financial statements for eventual costs of restoration of landfill site were deductible. Dispit v Revenue & Customs Commissioners – 2007 STC (SCD) 23

Whether costs incurred by firm of solicitors involved in litigation for partners personally were wholly and exclusively laid out for the purposes of the profession of the firm. AB (a firm) v Revenue & Customs Commissioners – 2007 STC (SCD) 99; Costs incurred by firm conducting litigation on behalf of a partner not a trading expense. AB (A Firm) v Revenue & Customs Commissioners – [2007] SpC 572

Whether indemnity payment to bank on termination of swap transaction was deductible in computing profits, whether Revenue or capital in nature. Kato Kagaku Ltd v Revenue & Customs Commissioners – 2007 STC (SCD) 412

A self-employed milkman kept his books of account at home, and travelled from home to dairy to collect van and produce. Travel expenses not deductible – Jackman v Powell [2004] STC 645

Sums paid for the release of restrictive covenants over land prior to grant of an option does not reduce the consideration received for the option nor is it deductible as an expense “wholly and exclusively incurred”. (Garner (HMIT) v Pounds Shipowners and Shipbreakers Ltd; Garner (HMIT) v Executors of Pounds (Deceased)) [2000] STC 420

Imputation of notional management expenses – Belville Holdings Ltd (in receivership and liquidation) v Cronin (Inspector of Taxes) [1993] ITR Vol 3 page 340 – CLTP 4.4.8

Removal/relocation expenses of two partners in a professional practice were not deductible in ascertaining the profits of the firm – MacKinlay (Inspector of Taxes) v Arthur Young McClelland Moores & Co [1989] STC 898

Expenditure incurred in satisfying ordinary basic needs (in this case, clothing) could not be exclusively for professional purposes. – Mallalieu v Drummond (Inspector of Taxes) [1983] STC 665

A company which paid its sole shareholder’s legal costs in a dispute were deductible and were not a distribution as the Revenue suggested. If the costs had not been paid the premises in which the shareholder carried out his business would have been lost to the company. (Strachan v The Queen) – Canadian case [1983] STC 195

A businessman who pays for his own lunch does not spend his money exclusively for the purposes of his business. – Caillebotte (HM Inspector of Taxes) v Quinn (1975) 50 TC 222

Nursing home expenses not wholly and exclusively incurred for the purposes of the trade. – Murgatroyd (H.M. Inspector of Taxes) v Evans – Jackson (1966) 43 TC 581

Tax paid in Ireland could not be deducted when computing a UK tax liability – CIR v Dowdall O’Mahony & Co Ltd (1952) 33 TC 259

Expenditure incurred in the formation of a new holding company was not incurred wholly and exclusively for the purposes of a trade by a subsidiary and was capital in nature. JB Kealy (Inspector of Taxes) v O’Mara (Limerick) Ltd. [1942] ITR Vol 1 page 642. CLTP 4.1.2.

Remuneration paid to directors not all wholly and exclusively incurred for the purposes of the trade. – Copeman (HM Inspector of Taxes) v William Flood & Sons Limited (1940) 24 TC 53

Whether payments made in respect of certain exploitation costs were costs wholly and exclusively laid out for purposes of trade - Icebreaker 1 LLP v R&CC [2011] STC 1078

Whether payment to trust for benefit of employees incurred wholly and exclusively for purposes of company’s trade - JT Dove Ltd v R&CC [2011] SFTD 348

Spanish rules prohibiting deduction from corporation tax due in Spain amount corresponding to tax due in another member state but not paid by virtue of exemption and whether national rules compatible with principle of free movement of capital. Banco Bilbao Vizcaya Argentaria SA v Administración General del Estado - [2012] STC 1300

Whether expenditure on professional fees in relation to criminal proceedings was wholly and exclusively laid out or expended for purpose of trade. Duckmanton v Revenue and Customs Commissioners - [2013] STC 2379

Whether penalty imposed by motor racing organisation for breach of rules wholly and exclusively laid out or expended for purposes of trade. McLaren Racing Ltd v Revenue and Customs Commissioners - [2013] SFTD 18

Trademarks licensed back to subsidiaries in return for premiums and whether deductible and whether assignments valid under common law. Iliffe News and Media Ltd and others v Revenue and Customs Commissioners - [2013] SFTD 309

Whether taxpayer entitled to deduct expense of journeys between his home and private hospitals. Samadian v Revenue and Customs Commissioners - [2014] STC 763

Contributions to employee benefit trusts were made for purpose of avoiding restriction on deductions for employee benefit contributions and whether expenditure incurred wholly and exclusively for purpose of company’s trade – Scotts Atlantic Management Ltd and another v Revenue and Customs Commissioners [2015] UKUT 66 (TCC)

Whether payments made to employee benefit trusts expended wholly and exclusively for the purposes of the trade of the taxpayers. Alway Sheet Metal Ltd and others v Revenue and Customs Commissioners – [2017] UKFTT 198 (TC)

Case I - type of trade

Whether taxpayer carrying on trade or business that included the exploitation of films and was film trading stock in relation to taxpayer’s trade or business - R&CC v Micro Fusion 2004–1 LLP [2010] STC 1541

Taxpayer acquired three small qualifying films and whether taxpayer was prohibited from claiming relief as a deduction from profits - R&CC v Halcyon Films LLP [2010] STC 1125

Whether partnership carrying on trade or business consisting of or including exploitation of films and whether film constituting trading stock – Revenue and Customs Commissioners v Micro Fusion 2004–1 LLP; Revenue and Customs Commissioners v Halcyon Films LLP [2009] STC 1741

Expenses of management

Whether company entitled to deduct expenses incurred in delisting shares and whether company an investment company – Dawsongroup Ltd v Revenue and Customs Commissioners [2009] SFTD 435

Domestic law v EU law

Domestic rules restricting parent company to deduct losses incurred on write down to book value of subsidiaries resident in other EU member states was contrary to EU law. Rewe Zentralfinanz eG v Finanzamt Loln Mitte (case C-347/04) – 2008 STC 2875

Revenue Commissioners: discovery assessment

Revenue were entitled to make a discovery assessment in connection with amounts paid to an employee benefit trust. Revenue and Customs Commissioners v Household Estate Agents – 2008 STC 2045

Definition of “a sum”

A management company transferred shares to a company which subsequently transferred shares to a pension scheme for the benefit of the taxpayer was regarded as sum paid. Irving v Revenue and Customs Commissioners – 2008 STC 597

Accounting standards

Deduction for depreciation included in closing stock valuations – Revenue & Customs Commissioners v William Grant & Sons Distilleries Ltd; Small (IoT) v Mars UK Ltd [2007] STC 680

Accepted accounting practices subordinate to tax principles: to extent depreciation was included in cost of stock, it was disallowable. Mars UK Limited v Small (Insp. of Taxes) – [2005] STC 958

When a debt becomes bad, accountant entirely misjudged the value of work for prior years. Thompson v IRC – 2005 SpC 458

Accepted accounting practices subordinate to tax principles: gross depreciation rather then net depreciation was the appropriate add-back. William Grant & Sons Distillers Ltd. v IRC – [2006] STC 69.

Accepted accounting practices subordinate to tax principles: to extent depreciation was included in cost of stock, it was disallowable – Trevor Small (HM Inspector of Taxes) v Mars UK Limited – Ch D [2005] EWHC 553 (Ch)

Case which analyses what constitutes the hire of a car for the purposes of the restriction. Case related to a finance company which hired cars in for onward rental. Also considers use of accountancy principles in computation of profits. Lloyds UDT Finance Ltd v Chartered Finance Trust Holdings plc and Others. [2002] STC 956.

Case I - capital expenditure

The issue was whether the work in question was of such a nature and scale as to change the character of the object in question (in this case a gas distribution system). Held – the system was not merely restored to its original state; its character had been changed. Auckland Gas Company Limited v Commissioner of Inland Revenue. [2000] STC 527

Where existing employees are transferred with a business and the liability for outstanding paid leave is taken into account in the purchase price, payments subsequently made are capital not revenue. Commissioner of Inland Revenue (New Zealand) v New Zealand Forest Research Institute Ltd [2000] STC 522

A payment to get rid of an onerous asset is generally revenue unless related to the whole structure of the profit making apparatus. However, where the asset is a lease, the payment is capital. (Decision released 15 June 2000 Bullrun Inc.) (2000) SpC 248

The cost of purchasing and planting trees was capital where land was not previously woodland. Connolly (Inspector of Taxes) v WW. [1975] ITR Vol 2 page 657. CLTP 4.4.6

Legal costs incurred in defending an action were not deductible as revenue expenses – Casey v AB Ltd. [1964] ITR Vol 2 page 500 – CLTP 4.4.4.

Expenses incurred in replacing part of a building were repairs not capital. No improvement had occurred and the new building was only a small part of the factory as a whole. Curtin (Inspector of Taxes) v M Ltd. [1957] ITR Vol 2 page 360. CLTP 4.2.3.

Cost of improved employee facilities, constructed at the behest of the Public Health Authority, allowable as revenue – JB Vale (Inspector of Taxes) v Martin O’Mahony & Brothers Limited [1946] ITR Vol 2 page 32 – CLTP 4.4.1

Lump sum contribution to form the nucleus of a staff pension scheme held to be capital – Atherton (H.M. Inspector of Taxes) v British Insulated and Helsby Cables, Limited (1925) 10 TC 155

Expenditure incurred in restoring a building under a covenant in a lease was capital. Martin Fitzgerald v Commissioners of Inland Revenue. [1925] ITR Vol 1 page 91. CLTP 4.2.1

Case I - bad debts

Taxation treatment of a sum which had previously been ruled by the courts as being a bad debt – Bourke (Inspector of Taxes) v Lyster & Sons Ltd. [1958] ITR Vol 2 page 374

Employment-related share schemes

Grant of share options to employees of taxpayer companies by employee benefit trust and whether debit arising under international financing reporting standard incurred wholly and exclusively for purposes of trade and deductible as trading expense of taxpayer companies – NCL Investments Ltd and another v Revenue and Customs Commissioners [2017] UKFTT 495 (TC)

Appeal Commissioners Determination

PAYE/PRSI not operated by taxpayer re bonuses to staff. Settlement liability agreed with Revenue based on treating the payments made by the employer as gross from which tax/PRSI ought to have been deducted. Whether payment of the settlement amount (excluding interest and penalties) an allowable deduction? Decision: Appeal fails. 6 AC 2000

Professional firm conducted by three partners. Partnership carrying on its business in premises owned by the partners. Percentage profit shares in partnership not identical to percentages of rental ownership of the property. Whether rent charged in the partnership accounts an allowable deduction in computing the profits of the firm?

Decision: Allow appeal. 7 AC 2000

Denial of subsistence expenditure – 08TACD2018

Foreign tax on royalties as a deduction – 02TACD2018

Amount of monies to be added back in relation to the private use of motor vehicles – 06TACD2017a

Revenue Guidance

Trading interest paid – TB11, July 1993 2.2

Accounting rules and taxation – TB41, September 2000, pp14 and 15

Travel and subsistence expenses for sole traders – eBrief No. 104/15

Tax treatment of debt issuance costs – eBrief No. 140/18

Tax deductibility in remunerating family members – eBrief No. 120/18

Irish Tax Review Articles

Taxation of Treasury Products. Pat O’Brien, Irish Tax Review, March, 1991

Inspector of Taxes v. Ringmahon Company. Ciaran Ramsay, Irish Tax Review, March, 2000.

Irish Tax Review, November 2000 – The UK VAT Tribunal has ruled that the costs of a party following the premiere of a film are non-deductible entertainment.

The Irish Tax Review, January 2001 – The UK VAT Tribunal has ruled that cars held for short periods by a car leasing company were on revenue account and were not capital assets.

IFRS and Tax – An Introduction. Teresa McColgan, Irish Tax Review, July, 2004

Transfer Pricing Overview: An introduction. Dan McSwiney, Irish Tax Review, November, 2008

Family Employments - Tax Deductibility, Income Splitting and PRSI Implications. Kieran Coughlan Irish Tax Review, April, 2010

Taxation of Intellectual Property – Part 2. John Heffernan, Irish Tax Review, September, 2010

Taxation of Damages and Other Settlement Payments. Ciaran Desmond, Evelyn Breen, Gareth O’Connell, Irish Tax Review, Issue 1, 2013

Trading Deductions on the Way to Formula 1. Tom Maguire, Irish Tax Review, Issue 3, 2016

Revenue Precedents

Are legal fees incurred in connection with the ownership of a business property deductible in arriving at trading profits? The allowability of legal expenditure will depend on whether it is attributable to Revenue or Capital. This matter has been considered in a number of tax cases and the main findings appear to be that legal expenses incurred in acquiring a capital asset are treated as capital expenditure, yet expenditure incurred in protecting the title to a capital asset, when it has been acquired, may be deductible revenue expenditure. The case of Southern v Borax Consolidated Ltd. (1940) 23 TC 597 is relevant. Originally published: 19/04/1994 File ref:IT943501

Are registration fees or licence renewal fees which are required by law to be paid by a trader or professional deductible? Yes. Provided they are laid out wholly and exclusively for the purposes of the trade. Originally published: 02/06/1993 File ref:IT891143

Case II – deductions: Can a partnership claim a deduction for rent paid in respect of a premises which is owned by the individual partners in the firm? No. It appears that the lease involved between the partnership and the partners has no legal standing. The case of Rye v Rye 1962 A.C. 496 is relevant. Farming – superlevy: Is the superlevy penalty collected by Co-ops from farmers for exceeding their milk quota allowed as a charge against farming profits? It is accepted that payments by farmers under the European Communities (Milk Levy) Regulations 1985 are an expense of the trade. Originally published: 18/10/1995 File ref:IT953545

Foreign exchange loss on loan – whether allowable: Taxpayer claiming relief for foreign exchange loss on five year loan obtained to purchase plant. Whether borrowings are a means of temporary and fluctuating accommodation. Effect of decision in Mutual Enterprises Ltd case. The Supreme court decision in Mutual Enterprises held that the question of whether borrowings are a means of temporary and fluctuating accommodations is a question of fact rather than law. Even though the Circuit Court judge in the particular circumstances of the case held that the borrowings were on revenue account, the dicta in the High Court indicate that the High Court judge would have attached significance to the fact that money was borrowed with the intention of purchasing a capital asset. s61 Income Tax Act, 1967. Originally published: 15/01/1997 File ref:IT972000

If a trader, who offers a “free gift” to a customer who purchases certain items, entitled to a deduction for the cost of the “free gift” or is the cost disallowed under TCA97 s840? e.g. a trader starts a sales promotion whereby the purchaser of a washing machine will receive a radio to the value of £20. It appears that in these circumstances the contract between the customer and the trader involves both the washing machine and the radio. In effect the radio is not a free gift and as such would not come within the provisions of s 840. It is the Revenue view that the cost of each radio is allowable in computing the profits of the trade. Originally published: 18/01/1995 File ref:IT943520

Refunds of a percentage of fees paid by self employed practitioners to the Medical Protection Society are made by Health Boards. Tax relief on the gross fees is estimated by the boards when they are calculating the refunds. Do these refunds have to be taken into account when preparing accounts and on what amounts is tax relief due to the practitioners? Refunds of fees received must be taken into account. As a result tax relief will be due on the net amount paid in each case i.e. the gross payment made less the actual refund received. Originally published: 20/09/1995 File ref:IT953548

Sportsmen – income from media: Amateur sportsmen receiving payments from media. Payments are chargeable to tax and should be included in returns. Originally published 15/11/1989 File ref:IT892043

Treatment of tapes owned by a video library: In the circumstances of a particular case, it was agreed that tapes could be treated as trading stock. Originally published: 11/04/1991 File ref:IT912005

Whether a deduction due in respect of a provision for a loss on a court case? In principle there is no statutory rule against charging a provision for a liability which has not materialised at the accounts date, provided such a provision will result in the accounts providing a true and fair view of the profits of the period and the amount of the provision can be estimated with reasonable accuracy. Where the claim includes a claim for a return of fees already earned, this aspect should be dealt with in the same manner as the rest of the claim. Originally published: 22/05/1997 File ref:IT972004A

Whether a deduction is allowable in computing the profits of a trade or profession in respect of “protection money” paid? A deduction is not allowable in respect of “protection money”. s61 Income Tax Act 1967 Originally published: 29/01/1997 File ref:IT972501

Whether insurance premiums and insurance claims paid by a compensation fund which is a trade protection association are allowable as deductions against income of the fund? Both insurance premiums and insurance claims are allowable deductions. Originally published: 25/08/1997 File ref:IT972510

Whether interest which qualifies as a deduction for a trading company under this section may be allowed even where it is capitalised in the accounts? – Yes. Originally published: 12/10/1995 File ref:CTF203A

Whether professional fees incurred in connection with a tax appeal are deductible? Such fees are not deductible. Normal recurring professional fees incurred in preparing accounts or agreeing liabilities are allowable. Originally published: 10/10/1995 File ref:IT952564

Whether unbilled disbursements on behalf of clients can be deducted in the period in which paid? Where there are unbilled disbursements, there is no known liability in the majority of cases. The presumption is that the disbursement will be billed to the client on whose behalf it was incurred. In so far as it cannot be so billed or the client refuses to pay it, the amount can be written off at that stage. Originally published: 22/05/1997 File ref:IT972004B

Whether, in a trade or profession, interest paid on borrowings used to fund drawings is allowable. Where a capital account is in debit and the debit balance arises from an excess of drawings over profits available to fund those drawings, the interest portion of the bank borrowings used to fund the deficit is not allowable. Originally published: 01/02/1996 File ref:IT962501

Corresponding UK Tax Provision

Section 74, Income and Corporation Taxes Act 1988. Now re-enacted at various places in the Corporation Tax Act 2009. Refer to the Destination Table of that Act for details.

Sections referred to in text

section 10 [Connected persons]

section 826 [Agreements for relief from double taxation]

Cross references

10 Connected persons

86 Cost of registration of trade marks

91 Receipts accruing after discontinuance of trade or profession

92 Receipts and losses accruing after change treated as discontinuance

104 Taxation of certain rents and other payments

127 Tax treatment of restrictive covenants

176A Purchase of own shares - Supplementary

192D Exemption in respect of fuel grant

267H Application (Chapter 6)

529C Deduction of tax from relevant payments

529I Repayment of appropriate tax

697LB Treatment of finance costs

758 Relief for expenses