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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Wholly and exclusively: companies: take-over bids: other grounds for disallowance

S54 Corporation Tax Act 2009 (CTA 2009)

Gifts, entertainment etc

Expenditure on ensuring that a company’s issued shares do not change hands is capital, but in those circumstances the expenditure will in any event clearly fall foul of the test in S54(1)(a) CTA 2009 (see BIM38275).

Where, exceptionally, a deduction is claimed for losses on the sale of shares purchased as part of a (possibly illegal) price support operation, the capital argument may well have independent significance. For losses on disposals of shareholdings where the conditions relating to the substantial shareholdings exemption are met see CG53000 onwards.

There is detailed guidance on the capital/revenue divide at BIM35000 onwards.

Finally, you should not overlook the disallowance of expenditure on gifts and entertaining under S1298 CTA 2009. Such expenses might be incurred, for example, to maintain the loyalty of existing shareholders (see BIM45000 onwards).