BIM37700 - Wholly and exclusively: duality of, or non-trade, purpose: remuneration, etc: contents

S34 Income Tax (Trading and Other Income) Act 2005, S54 Corporation Tax Act 2009

Introduction and layout of guidance

Over the years a number of cases have come before the courts to consider the deductibility of amounts paid to employees, including directors. Normal employee costs are allowable but a variety are not, including:

• employee costs that are capital - see for example BIM37725
• dividends paid to employees - see BIM37705
• ‘excessive’ remuneration, including remuneration paid to obtain a fiscal advantage - see BIM37707, BIM37715 and BIM37740

In addition there is a statutory timing rule in S36 Income Tax (Trading and Other Income) Act 2005 for unincorporated businesses and S1288 Corporation Tax Act 2009 for companies that precludes deduction for amounts paid more than nine months after the end of the period of account in question. There is detailed guidance at BIM47130.

1. BIM37705

   Duality of, or non-trade, purpose: remuneration, etc: claim to deduct dividends paid to directors
2. BIM37707

   Duality of, or non-trade: remuneration, etc: ‘excessive’ remuneration: establish the purpose
3. BIM37715

   Duality of, or non-trade: remuneration, etc: paid to daughter
4. BIM37717

   Duality of, or non-trade, purpose: remuneration, etc: payment to retiring director following dispute
5. BIM37720

   Duality of, or non-trade, purpose: remuneration, etc: payment to director for changing duties because of ill-health
6. BIM37725

   Duality of, or non-trade, purpose: remuneration, etc: loss on sale of property used as a temporary residence by employee
7. BIM37730

   Duality of, or non-trade, purpose: remuneration, etc: payment of share of profits following sale of shares
8. BIM37735

   Duality of, or non-trade, purpose: remuneration, etc: relative's wages
9. BIM37737

   Duality of, or non-trade, purpose: remuneration, etc: whether payments to minor children were allowable remuneration
10. BIM37740

    Duality of, or non-trade, purpose: remuneration, etc: 'excessive' remuneration: disallow the excess
11. BIM37745

    Duality of, or non-trade, purpose: remuneration, etc: premium to secure directors’ pension