Corporation Tax Act 2009

Chapter 4 U.K. Rules restricting deductions

1247 Introduction U.K.

(1) This Chapter contains provisions that restrict the deduction of expenses of management under section 1219.

(2) Other provisions that prohibit or restrict the deduction of expenses of management under section 1219 include—

(a) section 1290 (employee benefit contributions),

(b) section 1298 (business entertainment and gifts),

(c) section 1302 (social security contributions),

(d) section 1303 (penalties, interest and VAT surcharges),

(e) section 1304 (crime-related payments),

(f) section 200 of FA 2004 (no other relief for employers in connection with contributions),

(g) section 246 of FA 2004 (restriction of deduction for non-contributory provision).

(3) See also section 196A of FA 2004 (employers' contributions: power to restrict relief).

1248 Expenses in connection with arrangements for securing a tax advantage U.K.

(1) No deduction is allowed under section 1219 for any particular expenses of management if any part of those expenses is incurred directly or indirectly in consequence of, or otherwise in connection with, any arrangements for securing a tax advantage.

(2) In subsection (1) “arrangements for securing a tax advantage” means arrangements the main purpose, or one of the main purposes, of which is to secure—

(a) the allowance of a deduction (or increased deduction) under section 1219, or

(b) any other tax advantage.

F1 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) The reference in subsection (1) to expenses of management includes amounts treated by any provision as deductible under section 1219.

(5) In this section—

• “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),

• F2 ...

• “tax advantage” has the meaning given by [F3 section 1139 of CTA 2010].

Textual Amendments

F1 S. 1248(3) omitted (1.1.2014) by virtue of Finance Act 2013 (c. 29), Sch. 29 paras. 39(a), 52

F2 Words in s. 1248(5) omitted (1.1.2014) by virtue of Finance Act 2013 (c. 29), Sch. 29 paras. 39(b), 52

F3 Words in s. 1248(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 689(b)(ii) (with Sch. 2)

1249 Unpaid remuneration U.K.

(1) This section applies if—

(a) an amount is charged in respect of employees' remuneration in the accounts for a period of a company with investment business,

(b) the amount would apart from this section be deductible under section 1219 as expenses of management, and

(c) the remuneration is not paid before the end of the period of 9 months immediately following the end of the period of account.

(2) If the remuneration is paid after the end of that period of 9 months, the deduction for it is allowed for the period of account in which it is paid (and not in accordance with the timing rule in section 1219(1)).

(3) No deduction is allowed for the remuneration under section 1219 if it is not paid.

Modifications etc. (not altering text)

C1 S. 1249(1)(2) applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 82(2)(5) (with s. 147, Sch. 17)

C2 S. 1249(1)(3) applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 82(3)(5) (with s. 147, Sch. 17)

1250 Unpaid remuneration: supplementary U.K.

(1) For the purposes of section 1249 an amount charged in the accounts in respect of employees' remuneration includes an amount for which provision is made in the accounts with a view to its becoming employees' remuneration.

(2) For the purposes of section 1249 it does not matter whether an amount is charged for—

(a) particular employments, or

(b) employments generally.

(3) If the profits of the company are calculated before the end of the 9 month period mentioned in section 1249(1)(c)—

(a) it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but

(b) if the remuneration is subsequently paid before the end of that period, nothing in this subsection prevents the calculation being revised and any tax return being amended accordingly.

(4) For the purposes of this section and section 1249 remuneration is paid when it—

(a) is treated as received by an employee for the purposes of ITEPA 2003 by section 18 or 19 of that Act (receipt of money and non-money earnings), or

(b) would be so treated if it were not exempt income.

(5) In this section and section 1249—

• “employee” includes an office-holder and “employment” therefore includes an office, and

• “remuneration” means an amount which is or is treated as earnings for the purposes of Parts 2 to 7 of ITEPA 2003.

1251 F4 Car ... hire U.K.

(1) Subsection (2) applies if, in calculating the total profits of a company with investment business, a deduction is allowed under section 1219 for expenses incurred on the hiring of a car [F5 which is not—

(a) a car that is first registered before 1 March 2001,

(b) a car that has low CO₂ emissions,

(c) a car that is electrically propelled, or

(d) a qualifying hire car.]

(2) The amount of the deduction which would otherwise be allowable is reduced by [F6 15%].

(3) Subsection (4) applies if a deduction for expenses is reduced as a result of subsection (2) [F7 (including as applied by section 82(4) of FA 2012)], or a corresponding provision, and—

(a) subsequently—

(i) there is a rebate (however described) of the hire charges, or

(ii) a debt in respect of any of the hire charges is released otherwise than as part of a statutory insolvency agreement, and

(b) a credit representing the rebate, or the amount released, reverses (in whole or in part) a debit representing the expenses.

(4) In applying subsection (2) of section 1230 (calculation of the reversal amount for the purposes of the claw back rules)—

(a) take the amount given by Step 1,

(b) [F8 reduce that amount by 15%] (instead of applying Step 2), and

(c) apply Step 3 to the amount given by paragraph (b).

(5) In this section “corresponding provision” means—

(a) section 56(2) (car F9 ... hire: trade profits and property income), [F10 or]

(b) section 48(2) of ITTOIA 2005 (car F11 ... hire: trade profits and property income), F12 ...

F12 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7) Sections 57 (meaning of “car F14 ...” and other expressions) and [F15 58A (short-term hiring in and long-term hiring out) ] apply for the purposes of this section as they apply for the purposes of section 56.

[F16 (8) For the purposes of section 58B of this Act and section 50B of ITTOIA 2005 (connected persons: application of restrictions), this section is to be treated as if it were part of section 56 of this Act.]

Textual Amendments

F4 Words in s. 1251 heading omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 57(9)

F5 Words in s. 1251(1) substituted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 57(2)

F6 Figure in s. 1251(2) substituted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 57(3)

F7 Words in s. 1251(3) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 208(2)

F8 Words in s. 1251(4)(b) substituted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 57(4)

F9 Words in s. 1251(5)(a) omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 57(5)

F10 Word in s. 1251(5)(a) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 16 para. 208(3)(a)

F11 Words in s. 1251(5)(b) omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 57(5)

F12 S. 1251(5)(c) and word immediately preceding it omitted (17.7.2012) by virtue of Finance Act 2012 (c. 14), Sch. 16 para. 208(3)(b)

F13 S. 1251(6) omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 57(6)

F14 Words in s. 1251(7) omitted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 11 para. 57(7)(a)

F15 Words in s. 1251(7) substituted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 57(7)(b)

F16 S. 1251(8) inserted (with effect in accordance with Sch. 11 paras. 65-67 of the amending Act) by Finance Act 2009 (c. 10), Sch. 11 para. 57(8)

Modifications etc. (not altering text)

C3 S. 1251(1)(2) applied (with effect in accordance with s. 148 of the amending Act) by Finance Act 2012 (c. 14), s. 82(4)(5) (with s. 147, Sch. 17)