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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Wholly and exclusively: contents

In S34 Income Tax (Trading and Other Income) Act 2005 for unincorporated companies and S54 Corporation Tax Act 2009 for companies, the statute says that expenditure cannot be deducted in computing trading profits unless it is incurred wholly and exclusively for the purposes of the trade, profession or vocation. The guidance that follows describes this statutory restriction.

A full list of the contents of the guidance on wholly & exclusively is shown below. The guidance is subdivided into sections, the opening page of each section being bold in the list below. Please click on the page number alongside to go direct to each section.

Topics covered
  1. BIM37005
    Topics covered
Overview
  1. BIM37007
    Overview
Statutory background: what the guidance covers
  1. BIM37010
    Statutory background: what the guidance covers: contents
  2. BIM37020
    Statutory background: legislative starting point
  3. BIM37025
    Statutory background: expenses rule for employees
  4. BIM37030
    Statutory background: tax is charged on the full amount of profits
  5. BIM37035
    Statutory background: the statutory prohibition
  6. BIM37045
    Statutory background: appeal to be on a point of law
How to establish purpose
  1. BIM37050
    How to establish purpose: contents
  2. BIM37055
    How to establish purpose: whose purpose
  3. BIM37060
    How to establish purpose: purpose is a question of fact
  4. BIM37065
    How to establish purpose: a question of fact to be decided by examining the evidence
  5. BIM37070
    How to establish purpose: objective or subjective test
  6. BIM37075
    How to establish purpose: distinction between purpose and motive
Case law
  1. BIM37100
    Case law: contents
  2. BIM37200
    Case law: remoteness
  3. BIM37300
    Case law: the 'capacity' test
  4. BIM37400
    Case law: incidental benefit
  5. BIM37500
    Case law: subscriptions and donations
  6. BIM37510
    Case law: subscriptions and donations: charitable gift to hospital
Duality of, or non-trade, purpose: travel costs
  1. BIM37600
    Duality of, or non-trade, purpose: travel costs: contents
  2. BIM37605
    Duality of, or non-trade, purpose: travel costs: home to work
  3. BIM37610
    Duality of, or non-trade, purpose: travel costs: overseas conference plus holiday
  4. BIM37615
    Duality of, or non-trade, purpose: travel costs: overseas conference
  5. BIM37620
    Duality of, or non-trade, purpose: travel costs: to and between sites
  6. BIM37625
    Duality of, or non-trade, purpose: travel costs: overseas visit
  7. BIM37630
    Duality of, or non-trade, purpose: travel costs: home to work by way of a supplier
  8. BIM37635
    Duality of, or non-trade, purpose: travel costs: home to work: predictability of place of work
Duality of, or non-trade, purpose: non travel topics
  1. BIM37650
    Duality of, or non-trade, purpose: non travel topics: contents
  2. BIM37660
    Duality of, or non-trade, purpose: non travel topics: subsistence
  3. BIM37665
    Duality of, or non-trade, purpose: non travel topics: accommodation and subsistence
  4. BIM37670
    Duality of, or non-trade, purpose: non travel topics: accommodation and subsistence: 'itinerant' trades
  5. BIM37675
    Duality of, or non-trade, purpose: non travel topics: accommodation and subsistence: sub-contractors
  6. BIM37680
    Duality of, or non-trade, purpose: non travel topics: interest payments
  7. BIM37690
    Duality of, or non-trade, purpose: non travel topics: building society demutualisation
Duality of, or non-trade, purpose: remuneration, etc
  1. BIM37700
    Duality of, or non-trade, purpose: remuneration, etc: contents
  2. BIM37705
    Duality of, or non-trade, purpose: remuneration, etc: claim to deduct dividends paid to directors
  3. BIM37707
    Duality of, or non-trade: remuneration, etc: ‘excessive’ remuneration: establish the purpose
  4. BIM37715
    Duality of, or non-trade: remuneration, etc: paid to daughter
  5. BIM37717
    Duality of, or non-trade, purpose: remuneration, etc: payment to retiring director following dispute
  6. BIM37720
    Duality of, or non-trade, purpose: remuneration, etc: payment to director for changing duties because of ill-health
  7. BIM37725
    Duality of, or non-trade, purpose: remuneration, etc: loss on sale of property used as a temporary residence by employee
  8. BIM37730
    Duality of, or non-trade, purpose: remuneration, etc: payment of share of profits following sale of shares
  9. BIM37735
    Duality of, or non-trade, purpose: remuneration, etc: relative's wages
  10. BIM37737
    Duality of, or non-trade, purpose: remuneration, etc: whether payments to minor children were allowable remuneration
  11. BIM37740
    Duality of, or non-trade, purpose: remuneration, etc: 'excessive' remuneration: disallow the excess
  12. BIM37745
    Duality of, or non-trade, purpose: remuneration, etc: premium to secure directors’ pension
Duality of, or non-trade, purpose: loans/advances to others: whose trade purpose?
  1. BIM37750
    Duality of, or non-trade, purpose: loans/advances to others: whose trade purpose?: contents
  2. BIM37753
    Duality of, or non-trade, purpose: loans/advances to others: temporary loans made by brewer
  3. BIM37755
    Duality of, or non-trade, purpose: loans/advances to others: advances to secure supply of raw material
  4. BIM37760
    Duality of, or non-trade, purpose: loans/advances to others: advance to secure a 10-year supply of raw material
  5. BIM37765
    Duality of, or non-trade, purpose: loans/advances to others: architect buying shares in client companies
  6. BIM37770
    Duality of, or non-trade, purpose: loans/advances to others: loans by a firm of solicitors
  7. BIM37775
    Duality of, or non-trade, purpose: loans/advances to others: solicitor guaranteeing client's borrowing
  8. BIM37780
    Duality of, or non-trade, purpose: loans/advances to others: payment under guarantee given to exhibition
  9. BIM37785
    Duality of, or non-trade, purpose: loans/advances to others: by film writer to company to produce a film
  10. BIM37790
    Duality of, or non-trade, purpose: loans/advances to others: to allow subsidiaries to meet their obligations
  11. BIM37795
    Duality of, or non-trade, purpose: loans/advances to others: to secure sale of subsidiary?
  12. BIM37797
    Duality of, or non-trade, purpose: loans/advances to others: for own trade or for subsidiary's?
Expense of earning or application of profits?
  1. BIM37800
    Expense of earning or application of profits?: contents
  2. BIM37810
    Expense of earning or application of profits?: defalcations by controlling director
  3. BIM37820
    Expense of earning or application of profits?: rent subject to abatement of profits
  4. BIM37830
    Expense of earning or application of profits?: technical assistance in return for a share of profits
  5. BIM37840
    Expense of earning or application of profits?: legal costs in connection with an appeal
  6. BIM37850
    Expense of earning or application of profits?: accountancy fees in connection with an appeal
  7. BIM37860
    Expense of earning or application of profits?: ‘compensation for loss of office’ on share sale
Expenditure having an intrinsic duality of purpose
  1. BIM37900
    Expenditure having an intrinsic duality of purpose: contents
  2. BIM37910
    Expenditure having an intrinsic duality of purpose: clothing
  3. BIM37920
    Expenditure having an intrinsic duality of purpose: food and drink
  4. BIM37925
    Expenditure having an intrinsic duality of purpose: food and drink consumed at solicitors' annual conference and other matters
  5. BIM37928
    Expenditure having an intrinsic duality of purpose: living accommodation
  6. BIM37930
    Expenditure having an intrinsic duality of purpose: domestic accommodation
  7. BIM37935
    Expenditure having an intrinsic duality of purpose: travel between home and work
  8. BIM37940
    Expenditure having an intrinsic duality of purpose: health
  9. BIM37945
    Expenditure having an intrinsic duality of purpose: surgery
  10. BIM37950
    Expenditure having an intrinsic duality of purpose: cost of restoring health and fitness
  11. BIM37955
    Expenditure having an intrinsic duality of purpose: avoiding a conviction
  12. BIM37960
    Expenditure having an intrinsic duality of purpose: fines, penalties and damages
  13. BIM37965
    Expenditure having an intrinsic duality of purpose: costs of defending against a charge of gross misconduct
  14. BIM37970
    Expenditure having an intrinsic duality of purpose: natural love and affection
Partnerships
  1. BIM38100
    Partnerships
  2. BIM38110
    Partnerships: paying a partner a commercial rate for goods or services
  3. BIM38120
    Partnerships: meeting a partner's personal expenditure
Companies
  1. BIM38200
    Companies
  2. BIM38210
    Companies: establishing a company's purpose
  3. BIM38220
    Companies: cancellation of trade agreement
  4. BIM38230
    Companies: group service company
  5. BIM38250
    Companies: helping a subsidiary
  6. BIM38260
    Companies: take-over bids: introduction
  7. BIM38265
    Companies: take-over bids: general approach
  8. BIM38270
    Companies: take-over bids: nature of company incurring expenditure
  9. BIM38275
    Companies: take-over bids: trading companies
  10. BIM38280
    Companies: take-over bids: evidence
  11. BIM38285
    Companies: take-over bids: group situations
  12. BIM38290
    Companies: take-over bids: expenses recharged to trading subsidiaries
  13. BIM38295
    Companies: take-over bids: other grounds for disallowance
  14. BIM38297
    Companies: take-over bids: investment companies
Commencement, cessation or sale of business
  1. BIM38300
    Commencement, cessation or sale of business: contents
  2. BIM38310
    Commencement, cessation or sale of business: costs of going out of business
  3. BIM38315
    Commencement, cessation or sale of business: severance payments
  4. BIM38320
    Commencement, cessation or sale of business: payment to effect orderly shut-down of trade
  5. BIM38330
    Commencement, cessation or sale of business: cost of meeting former owner's obligations
  6. BIM38340
    Commencement, cessation or sale of business: compensation for loss of office at time of share sale
  7. BIM38350
    Commencement, cessation or sale of business: compensation for cancellation of service agreements linked to share sale
  8. BIM38360
    Commencement, cessation or sale of business: compensation for loss of office at time of takeover
  9. BIM38370
    Commencement, cessation or sale of business: cost of hiring and firing employees
  10. BIM38380
    Commencement, cessation or sale of business: compensation to directors following dispute
  11. BIM38385
    Commencement, cessation or sale of business: redundancy payments on takeover
  12. BIM38390
    Commencement, cessation or sale of business: payment in lieu of notice
  13. BIM38395
    Commencement, cessation or sale of business: liability for future leaving payments to employees
Artificial prices
  1. BIM38400
    Artificial prices
Fines, penalties and damages
  1. BIM38500
    Fines, penalties and damages: contents
  1. BIM38510
    Fines, penalties and damages: compensation for injury to customer
  2. BIM38515
    Fines, penalties and damages: penalties for infractions of the law are not allowable
  3. BIM38520
    Fines, penalties and damages: penalties for infractions of the law are not allowable (further discussion)
  4. BIM38522
    Fines, penalties and damages: confiscation orders
  5. BIM38525
    Fines, penalties and damages: costs incurred in settling an action for breach of the law
  6. BIM38530
    Fines, penalties and damages: cost of libel action
  7. BIM38535
    Fines, penalties and damages: payment to get director to withdraw legal action
  8. BIM38540
    Fines, penalties and damages: cost of settling civil action, trade purpose?
  9. BIM38545
    Fines, penalties and damages: cost of defending charge of breach of contract
  10. BIM38550
    Fines, penalties and damages: compromise settlement of action by former director
  11. BIM38560
    Fines, penalties and damages: application of hindsight
Tax cases referred to in the guidance
  1. BIM38600
    Tax cases referred to in the guidance