BIM42060 - Deductions: general: prohibitive rules

The following table summarises the general prohibitions and restrictions on deductions in computing trade profits and indicates where more detailed guidance may be found. These prohibitions are, however, subject to the priority rules at BIM42080.

Income Tax (Trading and Other Income) Act 2005 section

Corporation Tax Act 2009 section

Prohibition or restriction

Further guidance

33

53

No deduction of items of a capital nature.

BIM35000 onwards

34(1)(a)

54(1)(a)

No deduction for expenses not incurred wholly and exclusively for the purposes of the trade.

BIM42100 onwards

34(1)(b)

54(1)(b)

No deduction for losses not connected with or arising out of the trade.

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35

55

No deduction for any debts except: i. bad debts; and ii. a debt (or part) released by a creditor wholly and exclusively for the purposes of the trade as part of a statutory insolvency arrangement; and iii. a doubtful debt to the extent that it is estimated to be bad. For Corporation Tax, this rule applies only to non-money debts (as money debts fall within the loan relationship regime).

BIM42700 onwards

36

1288

No deduction for employees’ remuneration charged in the accounts for a period of account but not paid within nine months of the end of the period. (A deduction is allowed, however, when the remuneration is paid.)

BIM47130 onwards

38-44

1290-1297

No deduction for employee benefit contributions unless benefits are provided etc within nine months of the end of the period of account. (A deduction is allowed, however, when the benefit is provided.)

BIM44500

45-47

1298-1300

No deduction for certain business entertainment and gifts.

BIM45000 onwards

48-50B

56-58B

Restricted deduction for hire charges paid for certain motor cars.

BIM47780 onwards

-

59

No deduction for any royalty or other sum paid for the use of a patent. This rule applies to Corporation Tax only but for most patent royalties it is overridden by the rules of the intangible fixed assets regime (see CIRD10000 onwards).

BIM45965

52

-

No deduction for interest for which relief is given under certain other provisions. This rule applies to Income Tax only. Interest paid by companies is dealt with under the loan relationships regime (see CFM30000 onwards).

BIM45765

53

1302

No deduction for National Insurance contributions other than employers’ Class 1, Class 1A and Class 1B contributions.

BIM42523

54

1303

No deduction for any specified tax penalty, interest or VAT surcharge.

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55

1304

No deduction of expenditure the making of which is a criminal offence or which is induced by blackmail.

BIM43100 onwards

55A

60

No deduction for certain expenditure on an integral feature of a building or structure.

CA22300 onwards

55B

60A

Restriction on the deduction of a rental rebate payable under a plant or machinery lease.

-

-

1301A

For Corporation Tax, no deduction is allowed for interest otherwise than under the loan relationship regime.

CFM30000 onwards

-

1301B

For Corporation Tax, no deduction is allowed for qualifying charitable donations under the Gift Aid scheme (relief being given by deduction from the company’s total profits).

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