BIM38200 - Wholly and exclusively: companies: contents

S54 Corporation Tax Act 2009

Introduction and layout of guidance

In corporate cases it is important that you establish the company’s purpose in making a particular expenditure. A company’s purpose is that of its directors or shareholders (as expressed in Annual General Meeting) See BIM37055 andBIM38210.

Where the payment concerns a subsidiary or associated company there are three possibilities:

  1. the company is providing such assistance solely in the interests of the subsidiary/associate
  2. the company is providing such assistance partly in the interests of the subsidiary/associate and partly in its own interests, and
  3. the company is providing such assistance solely in its own interests

In situations (a) and (b) the relevant expenditure is not deductible. In (c) a deduction is permissible and (applying Bentleys, Stokes & Lowless v Beeson [1952] 33 TC 491, see BIM37400) notwithstanding the fact that the subsidiary/associate receives an incidental benefit. The relevant question is ‘what was the object of the person making the disbursement in making it?’ not ‘what was the effect of the disbursement when made?’.

The guidance on companies covers the following matters:

Note that for companies chargeable to Corporation Tax, the tax treatment of loans and advances is governed exclusively by the loan relationships regime in Parts 5 and 6 Corporation Tax Act 2009. Detailed guidance is at CFM30000.