House of Commons portcullis
House of Commons
Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill


Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions

599

 

1295    

Profits calculated before end of 9 month period

(1)   

This section applies if the income of the period of account mentioned in section

1290(1) is calculated before the end of the 9 month period mentioned in section

1290(2).

(2)   

It must be assumed, in making the calculation, that any benefits, expenses or

5

contributions which are not provided, paid or made when the calculation is

made will not be provided, paid or made before the end of that period.

(3)   

But if the benefits, expenses or contributions are subsequently provided, paid

or made before the end of that period, nothing in this section prevents the

calculation being revised and any tax return being amended accordingly.

10

1296    

Interpretation of sections 1290 to 1296

(1)   

In this section and sections 1290 to 1295

“accident benefit scheme” means an employee benefit scheme under

which benefits may be provided only by reason of a person’s

disablement, or death, caused by an accident occurring during the

15

person’s service as an employee of the employer,

“employee benefit contribution” is to be read in accordance with section

1291(1),

“employee benefit scheme” has the meaning given by section 1291(2),

“the employer” is to be read in accordance with section 1290(1),

20

“employer-financed retirement benefits scheme” has the same meaning as

in Chapter 2 of Part 6 of ITEPA 2003 (see section 393A of that Act),

“qualifying benefits” is to be read in accordance with section 1292,

“qualifying expenses” includes any expenses of a scheme manager (other

than the provision of benefits to employees of the employer)—

25

(a)   

which are incurred in operating the employee benefit scheme,

and

(b)   

which, if incurred by the employer, would be deductible in

calculating for corporation tax purposes the employer’s profits

of any period of account, and

30

“scheme manager” means a person who administers an employee benefit

scheme (acting in that capacity).

(2)   

A reference in this section and sections 1290 to 1295 to a company’s employee

includes the holder of an office under that company, and “employment” is to

be read accordingly.

35

1297    

Life assurance business

(1)   

This section applies if the employer is a company in relation to which section

76 of ICTA applies (expenses of companies carrying on life assurance

business).

(2)   

In determining for the purposes of section 1290(1) whether a deduction would

40

otherwise be allowable, the effect of section 86 of FA 1989 (spreading of relief

for acquisition expenses) is ignored.

(3)   

But section 1290(3) is subject to that section if, in accordance with subsection (2)

above, an amount is allowed as a deduction for a particular period under

section 1290(3).

45

 
 

Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions

600

 

(4)   

For the purposes of section 86 of FA 1989, the employee benefit contributions

are treated as expenses payable for that period which fall to be included at Step

1 in section 76(7) of ICTA.

(5)   

For the purposes of sections 1290 to 1296

(a)   

any reference to a deduction for employee benefit contributions is to be

5

read as a reference to an amount being brought into account under

section 76 of ICTA as expenses payable, and

(b)   

references to deduction are to be read in that light.

Business entertainment and gifts

1298    

Business entertainment and gifts

10

(1)   

This section applies if a company incurs expenses in providing entertainment

or gifts in connection with a business which it carries on.

(2)   

The general rule is that—

(a)   

no deduction is allowed for the expenses in calculating income from

any source for corporation tax purposes,

15

(b)   

no deduction is allowed under section 1219 for the expenses, and

(c)   

expenses to which this section applies are not to be brought into

account under section 76 of ICTA (expenses of companies carrying on

life assurance business) as expenses payable.

(3)   

The general rule prohibits the deduction, or the bringing into account, of

20

expenses which are incurred—

(a)   

in paying sums to or on behalf of an employee of the company, or

(b)   

in putting sums at the disposal of an employee of the company,

   

if (and only if) the sums are paid, or put at the employee’s disposal, exclusively

for meeting expenses incurred or to be incurred by the employee in providing

25

the entertainment or gift.

(4)   

The general rule is subject to exceptions—

for entertainment (see section 1299), and

for gifts (see section 1300).

(5)   

For the purposes of this section and those two sections—

30

(a)   

“employee” includes a director of the company and a person engaged

in the management of the company,

(b)   

“entertainment” includes hospitality of any kind, and

(c)   

the expenses incurred in providing entertainment or a gift include

expenses incurred in providing anything incidental to the provision of

35

entertainment or a gift.

1299    

Business entertainment: exceptions

(1)   

The prohibition in section 1298 on deducting, or bringing into account,

expenses incurred in providing entertainment does not apply in either of cases

A and B.

40

(2)   

Case A is where—

(a)   

the entertainment is of a kind which it is the company’s business to

provide, and

 
 

Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions

601

 

(b)   

the entertainment is provided in the ordinary course of the business

either for payment or free of charge in order to advertise to the public

generally.

(3)   

Case B is where the entertainment is provided for employees of the company

unless—

5

(a)   

the entertainment is also provided for others, and

(b)   

the provision of the entertainment for the employees is incidental to its

provision for the others.

1300    

Business gifts: exceptions

(1)   

The prohibition in section 1298 on deducting, or bringing into account,

10

expenses incurred in providing gifts does not apply in any of cases A, B, C and

D.

(2)   

Case A is where—

(a)   

the gift is of an item which it is the company’s business to provide, and

(b)   

the item is given away in the ordinary course of the business in order to

15

advertise to the public generally.

(3)   

Case B is where the gift incorporates a conspicuous advertisement for the

company unless—

(a)   

the gift is food, drink, tobacco or a token or voucher exchangeable for

goods, or

20

(b)   

the cost of the gift to the company, together with any other gifts (except

food, drink, tobacco or a token or voucher exchangeable for goods)

given to the same person in the same accounting period, exceeds £50.

   

The Treasury may by order amend the sum for the time being specified in

paragraph (b) so as to increase it.

25

(4)   

Case C is where gifts are provided for employees of the company unless—

(a)   

gifts are also provided for others, and

(b)   

the provision of the gifts for the employees is incidental to the provision

of gifts for the others.

(5)   

Case D is where the gift is given to—

30

(a)   

a charity,

(b)   

the Historic Buildings and Monuments Commission for England, or

(c)   

the Trustees of the National Heritage Memorial Fund.

Miscellaneous

1301    

Restriction of deductions for annual payments

35

(1)   

In calculating a company’s income from any source, no deduction is allowed

for an annual payment which meets the conditions in subsections (2) to (6).

(2)   

The payment must be a payment charged to—

(a)   

income tax under Part 5 of ITTOIA 2005 otherwise than as relevant

foreign income, or

40

(b)   

corporation tax under Chapter 7 of Part 10 (annual payments not

otherwise charged).

 
 

Corporation Tax Bill
Part 20 — General calculation rules
Chapter 1 — Restriction of deductions

602

 

(3)   

The payment must be made under a liability incurred for consideration in

money or money’s worth all or any of which—

(a)   

consists of, or of the right to receive, a dividend, or

(b)   

is not required to be brought into account in calculating for corporation

tax purposes the income of the company making the payment.

5

(4)   

The payment must not be a payment of income—

(a)   

which arises under a settlement made by one party to a marriage or

civil partnership by way of provision for the other—

(i)   

after the dissolution or annulment of the marriage or civil

partnership, or

10

(ii)   

while they are separated under an order of a court, or under a

separation agreement, or if the separation is likely to be

permanent, and

(b)   

which is payable to, or applicable for the benefit of, the other party.

(5)   

The payment must not be made to an individual under a liability incurred at

15

any time in consideration of the individual surrendering, assigning or

releasing an interest in settled property to or in favour of a person with a

subsequent interest.

(6)   

The payment must not be a payment of an annuity granted in the ordinary

course of a business of granting annuities.

20

(7)   

In subsection (2) “relevant foreign income” has the same meaning as in the

Income Tax Acts (see section 989 of ITA 2007).

(8)   

In the application of this section to Scotland the reference in subsection (5) to

settled property is to be read as a reference to property held in trust.

1302    

Social security contributions

25

(1)   

No deduction is allowed for corporation tax purposes for any contribution

paid by any person under—

(a)   

Part 1 of the Social Security Contributions and Benefits Act 1992 (c. 4),

or

(b)   

Part 1 of the Social Security Contributions and Benefits (Northern

30

Ireland) Act 1992 (c. 7).

(2)   

But this prohibition does not apply to an employer’s contribution.

(3)   

For this purpose “an employer’s contribution” means—

(a)   

a secondary Class 1 contribution,

(b)   

a Class 1A contribution, or

35

(c)   

a Class 1B contribution,

   

within the meaning of Part 1 of the Social Security Contributions and Benefits

Act 1992 or of the Social Security Contributions and Benefits (Northern

Ireland) Act 1992.

(4)   

Subsection (1) does not apply to the calculation of income from the holding of

40

an office (in relation to which section 969 applies income tax principles, those

including section 360A of ITEPA 2003 which corresponds to this section).

 
 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2009
Revised 6 February 2009