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HMRC internal manual

Business Income Manual

Specific deductions: Flood and erosion projects: Examples

Example 1

The proprietor of a seafront guesthouse who lives in the guesthouse all year round makes a cash contribution of £10,000 to a flood management project whose objective is to erect new flood defences along the seafront, including in front of their property. It is agreed in this case that the contribution is a qualifying contribution to a qualifying project and that there are no disqualifying benefits.

 

The contribution is an allowable deduction. Whilst, under normal trading rules, the expenditure could potentially be disallowed as being both capital in nature and also incurred partly for the non-business purpose of protecting the proprietor’s domestic accommodation, as the conditions are satisfied a deduction is allowed under this specific provision.

 

 

Example 2

A property development company wishes to acquire land that is owned by the local authority for the purposes of its property development business. The market value of the land is £50,000. The company agrees with the local authority that in return for its making of a cash donation of £50,000 to a flood management project the authority will transfer the land to the company for no consideration. It is agreed in this case that the contribution is a qualifying contribution to a qualifying project.

 

The contribution is not allowable. The land received by the developer in exchange for the contribution made is a disqualifying benefit.