CheckLists.Tax (beta)
F3 Payer/provider of income and benefits
Wholly and exclusively
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- XX
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XX
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HMRC manuals:
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Revenue or capital
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- Bringing into existence an enduring advantage
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- If the payment brings into existence an enduring advantage for the benefit of the trade it is likely to be capital.
- Set up costs of an employee pension scheme were capital in Helsby Cables.
- Removal of a single undesirable director was revenue in BW Noble Ltd.
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Legislation:
Cases:
British Insulated and Helsby Cables, Limited v Atherton (1925) 10 TC 155 (HoL);
BW Noble Ltd v. Mitchell (1927) 11 TC 372 (CoA);
HMRC manuals:
Commentary:
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- Lump sum to remove ongoing revenue expense
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- Capitalising a pension entitlement and paying it one lump sum was deductible in Hancock.
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Legislation:
Cases:
Hancock v. General Reversionary and Investment Co [1919] 1 KB 25;
HMRC manuals:
Commentary:
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Examples
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- Removal of onerous employee - deductible (even if purpose includes avoiding negative publicity)
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- BW Noble Ltd v. Mitchell - T might have been justified in dismissing director, but to avoid publicity injurious to T's reputation, entered into negotiations for the director to retire. Director claimed compensation and compromise was reached in satisfaction of all claims.
- Held: the payment was (i) for the benefit of the trade; (ii) wholly and exclusively so; (iii) revenue rather than capital.
- "It seems to me that the directors had to handle a situation of both delicacy and gravity, and, their bona fides not being questioned, it is clear that they took a course which they were justified in taking and made a payment in the interests of the carrying on of their trade." (at 420).
- Noted by analogy in Williams's Executors.
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Legislation:
Cases:
BW Noble Ltd v. Mitchell (1927) 11 TC 372 (CoA);
CIR v. Williams's Executors (1944) 26 TC 23 (HoL);
HMRC manuals:
Commentary:
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- Payment to set up an employee pension scheme: not deductible (capital)
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-Helsby Cables - payments to establish a pension scheme for current and future employees was wholly and exclusively for the purposes of the trade, but not deductible due to being capital expenditure.
- "The object and effect of the payment of this large sum was to enable the Company to establish the Pension Fund and to offer to all its existing and future employees a sure provision for their old age, and so to obtain for the Company the substantial and lasting advantage of being in a position throughout its business life to secure and retain the services of a contented and efficient staff." (at 193).
- On going contributions to the scheme would be deductible as not capital​
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Legislation:
Cases:
British Insulated and Helsby Cables, Limited v Atherton (1925) 10 TC 155 (HoL);
HMRC manuals:
Commentary:
See also:
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