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NCL Investments: upholding the primacy of accounts

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In NCL Investments, the Court of Appeal has considered the question of what it means for expenses to have been ‘incurred’ wholly and exclusively for the purposes of a trade. Differing with the approach taken by the Upper Tribunal in Ingenious, the court concluded that the use of ‘incurred’ did not introduce any requirement for there to have been any ‘real’ expenditure or outflow of resources. In finding that nothing more was required than that the debit was required under the relevant accounting standard, the court has confirmed that the starting point in determining a company’s profits and losses is the accounting treatment. A decision in favour of HMRC might have had wide-reaching implications.

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