BIM37700 - Wholly & exclusively: duality of, or non-trade, purpose: remuneration, etc
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 at FA89/S43 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.
| BIM37705 | Claim to deduct dividends paid to directors (Eyres v Finnieston Engineering Co Ltd) |
| BIM37707 | Excessive remuneration: establish the purpose (Stott & Ingham v Trehearne) |
| BIM37715 | Paid to daughter (Copeman v William Flood & Sons Ltd) |
| BIM37717 | Payment to retiring director following dispute (Deverell, Gibson & Hoare Ltd v Rees) |
| BIM37720 | Payment to director changing duties because of ill-health (Wilson v Nicholson Sons & Daniels Ltd) |
| BIM37725 | Loss on sale of property used as temporary residence by employee (Owen & Gadsdon v Brock) |
| BIM37730 | Payment of share of profits following sale of shares (Faulconbridge v Thomas Pinkney & Sons Ltd) |
| BIM37735 | Wife or civil partner’s wages (Moschi v Kelly) |
| BIM37737 | Whether payments to children were allowable remuneration (Dollar & Dollar v Lyon) |
| BIM37740 | Excessive remuneration - disallow the excess (Earlspring Properties Ltd v Guest) |
| BIM37745 | Premium to secure directors’ pension (Samuel Dracup & Sons Ltd v Dakin) |
