BIM44600 - Specific deductions: Employee benefit trusts: general purpose EBT contributions: timing of deductions: FA03/SCH24: qualifying expenses

‘Qualifying expenses’ are expenses of operating the employee benefit arrangements (but not the cost of the benefits themselves) which, if they had been incurred directly by the employer, would have been an allowable deduction in computing the employer’s taxable profits.

Examples of non-qualifying expenses, for employers who are carrying on a trade, are:

• expenses of a capital nature (such as the costs of acquiring capital assets), and
• expenses not wholly and exclusively for the purpose of the employer’s trade.

Disallowing deductions under FA03/SCH24/PARA1 (3)

Whether an employer’s contribution has been used to meet qualifying expenses is only relevant in determining the extent to which a deduction, which would otherwise be allowable for a period, should be disallowed for that period under PARA1 (3).

Allowing deductions in a later period under FA03/SCH24/PARA 1 (4)

Using a disallowed contribution to meet qualifying expenses in a later period does not trigger a deduction for the later period under PARA1 (4).

The only trigger for allowing a deduction for a later period under PARA1 (4) is if qualifying benefits are paid out of the disallowed contribution, see BIM44595.