In a series of recent cases, HMRC has challenged companies which have claimed deductions for payments made in the context of tax planning on the basis that they are not deductible under CTA 2010 s 54. Often the payments are to reward employees, and HMRC simultaneously claims that they are taxable income in the hands of the employee. This apparent contradiction is justified on the basis that the payments have a second, non-business purpose: to pay less tax. Can paying less tax be a purpose of the trade, whether the aim is to obtain a corporation tax deduction or to reduce the tax on your employees? The courts are divided.
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In a series of recent cases, HMRC has challenged companies which have claimed deductions for payments made in the context of tax planning on the basis that they are not deductible under CTA 2010 s 54. Often the payments are to reward employees, and HMRC simultaneously claims that they are taxable income in the hands of the employee. This apparent contradiction is justified on the basis that the payments have a second, non-business purpose: to pay less tax. Can paying less tax be a purpose of the trade, whether the aim is to obtain a corporation tax deduction or to reduce the tax on your employees? The courts are divided.
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