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No prevailing practice of corporation tax deductions for EBT contributions, Macdonald v Dextra

In the case of Boyer Allan Investment Services Ltd v HMRC the First-tier Tribunal upheld discovery assessments made as a result of contributions to an EBT being disallowed as deductions for corporation tax purposes under section 43 of the Finance Act 1989. When the relief was first claimed (2001-2002), it was not understood that this section deferred entitlement to relief (until such sums were applied in payment of taxable benefits) if the trustees had power to apply the contributions in payment of emoluments, as confirmed by the House of Lords in MacDonald (HMIT) v Dextra Accessories Ltd. However, although this misunderstanding was widespread among tax advisers and HMRC staff, the First Tier Tribunal held that this did not amount to a “practice generally prevailing” within the meaning of a statutory provision that would prevent a discovery assessment if it applied. In any event, even if the Tribunal had found there to be such a generally prevailing practice, it would not have been applicable to the particular circumstances under consideration.

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