Deductible meaning

UK Care No 1 Ltd v HMRC [2026] UKUT 90 (TCC) The appellant, UKC1, was a Guernsey-incorporated company. It served as the issuer of loan notes within a securitisation structure for the BUPA group. Those notes were placed at a discount and incurred transaction expenses. UKC1 recognised the obligation on an amortised cost basis. That accounting treatment reflected the discounted issue price and the associated fees borne at issue time. (CTA 2009, s 327 is inapplicable where fair value accounting is adopted.) In 2016—when BUPA intended to dispose of certain care homes included in the collateral package—BUPA acquired UKC1 and it became resident for UK tax. UKC1 subsequently bought back the loan notes. The terms for early repayment were set by a ‘Spens’ (or ‘make whole’) provision, which required payment of whichever was greater: the principal sum, or the present value of future cash flows, discounted by reference to a named gilt...

In this issue: Companies and corporation tax Employment taxes Taxes management and litigation International Individuals Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Companies and corporation tax Court of Appeal holds that payments in settlement of regulatory breaches were tax deductible (ScottishPower v HMRC) As noted in Tax weekly highlights—23 January 2025, the Court of Appeal has concluded that consumer redress paid by ScottishPower to resolve regulatory investigations is deductible for corporation tax, reversing the outcomes reached by both the First-tier Tax Tribunal (FTT) and the Upper Tribunal (UT). On the facts, the Court determined these sums were not fines or penalties and so the rule in McKnight (HM Inspector of Taxes) v Sheppard, which renders fines and penalties non-deductible, did not apply. The Court also dismissed the presence of any broader principle, in this context, that a payment must follow the tax treatment of...

In this issue: Employment taxes VAT International Individuals and income tax Taxes management and litigation Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Employment taxes Appeal court rules that loans advanced through a remuneration trust were chargeable as disguised remuneration and that the linked costs were non-deductible (Marlborough DP Limited v HMRC). In Marlborough DP Ltd, the Court of Appeal dismissed the taxpayer’s case and upheld the Upper Tribunal (UT). It found that amounts lent to a director under a remuneration trust fell within the disguised remuneration regime in Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), as they were made in connection with employment. The Court further concluded that the associated payments were not allowable for corporation tax, since they were not incurred wholly and exclusively for the purposes of the company’s trade. See News Analysis: Court of Appeal...

The UK’s rules on hybrid and other mismatches Since 1 January 2017, the UK’s hybrid and other mismatch rules (described in this Practice Note as the hybrid rules) have been in force, designed to neutralise tax mismatches arising from how a hybrid instrument or hybrid entity is treated for tax. Although the hybrid rules typically apply to cross-border dealings involving two or more jurisdictions, they can also apply to transactions that are entirely UK domestic. They specifically address: deduction/non-inclusion mismatches (D/NI mismatches), i.e. where a payment under a hybrid mismatch arrangement is deductible in the payer jurisdiction for tax purposes but is not included in the taxable income of a payee or a related party investor; and double deduction cases (DD cases), i.e. where a payment under a hybrid mismatch arrangement gives rise to more than one tax deduction. For more detail on the hybrid rules, see Practice Note: Hybrid mismatches—introduction to the rules. For an overview in table form of...

What is professional indemnity insurance? Professional indemnity insurance is a type of liability cover. It offers an individual professional or a firm an indemnity and protection against claims or losses resulting from negligent acts, mistakes or omissions linked to the insured professional practice. This cover usually also includes the acts, errors and omissions of former employees. In certain sectors—such as solicitors, accountants, architects, chartered surveyors, financial advisers and some healthcare professionals—holding professional indemnity insurance is a legal requirement. Nonetheless, any person or business that supplies advice, designs or services in a professional capacity should carry this insurance. The cover is generally intended to respond to client claims for damages arising in the ordinary course of the insured's professional services. These are claims brought by a client in connection with the routine delivery of the insured party’s professional services. For detailed guidance on professional indemnity insurance requirements across different professions, see Practice Notes: Professional indemnity insurance—solicitors Professional indemnity insurance—architects Professional indemnity insurance—accountants and auditors (ICAEW)...

ARCHIVED: This Practice Note has been archived and is not maintained. During the coronavirus (COVID-19) outbreak, the UK government brought in a range of measures to assist individuals and businesses negatively affected by the pandemic. Several measures involved funds paid directly by central or local government with no requirement to repay, ie grants rather than loans. For further details on these schemes, see Practice Note: Coronavirus (COVID-19)—tax implications [Archived]. Guidance on these schemes stated that recipients should recognise such grants as taxable income, as they effectively substituted business income that would otherwise have been earned. On 29 May 2020, the government released draft legislation, a tax information and impact note, and explanatory notes for consultation. This was ultimately enacted as section 106 and Schedule 16 to the Finance Act 2020 (FA 2020). The legislation’s purposes were: to treat COVID-19 support payments as income where the business fell within the scope of income tax or corporation tax to empower HMRC to claw back payments to which...

How should the trustees report the amount of the debt for the purposes of IHT ten-year charge? Should they include any index-linked element of the debt? We have found no authority directly answering this. The principal, or ten‑year, charge is imposed on the value of relevant property held by the trustees immediately before the ten‑year anniversary (TYA). See Practice Note: Relevant property trusts—the principal (ten‑year) charge. Where the trustees’ asset is encumbered by a charge with an index‑linked feature, the trust fund must be valued correctly just before the TYA. That exercise turns on the precise balance outstanding at that point and on whether the index‑linkage ought to be reflected, notwithstanding it would only bite once the loan is redeemed. As a broad rule, where property is charged, the amount secured is deductible from the property’s value when computing the IHT charge (section 5(3) and sections 162–166 of the Inheritance Tax Act 1984 (IHTA 1984)). There are, however, limited departures from that general position. Consequently, the amount to be...

In this Q&A we have assumed: the deceased’s assessment was correctly calculated a typical financial profile (not, for instance, no recourse to public funds) no top-up was due or paid no deprivation the income-based assessment was up to date Charging for a resident assessed as full cost and availing themselves of a deferred payment agreement would normally be as follows: income contribution: income minus personal allowance, per charging cycle remainder (after 12-week disregard) deferred against property Confirm the first was paid. For the second, check overcharging against beneficial interest; the lower capital limit is £14,250, not £23,250. Assessable capital = beneficial interest − 10% − £14,250 (Care and Statutory Support Guidance 8.12). Example: £200,000 interest gives £165,750. Systems may overrun, exceeding assessed capital; if so, reassess and cap recovery at that, with any surplus proceeds kept by the estate. Deprivation or unpaid income are not protected by the lower limit. If the...