BIM66220 - Subcontractors: expenses: payments to spouse, civil partner or relative

Must be wholly and exclusively for the purposes of the trade

ICTA88/S74 (1)(a) denies a deduction for expenditure not made wholly and exclusively for the purposes of the trade. Where there is both a personal and a business relationship between the payer and the recipient the expenditure may fail this test.

You should consider all the facts and circumstances of a particular case and allow a deduction where it is justified by the facts. Factors which may be relevant in considering a case where payment is made to a spouse or civil partner include:

• whether the subcontractor owns or rents business premises separate from the family home,
• where the spouse or civil partner carries out their duties,
• the nature of the duties performed, and
• the amount of the payment.

Where a deduction is claimed for payment at the commercial rate in respect of substantial duties performed at premises away from the family home it is very likely that the deduction is allowable. Conversely, where payment at a non-commercial rate is made in respect of minor services performed at the family home a deduction is unlikely to be justified. Between these two extremes there are a variety of circumstances where the conclusion turns on a detailed examination of all the facts.

The general issue of wages that are not wholly and exclusively for the purposes of the trade is discussed at BIM37700 onwards.