Part 3

Trading income
Chapter 5

Trade profits: rules allowing deductions

Contributions to local enterprise organisations or urban regeneration companies

Contributions to local enterprise organisations or urban regeneration companies
82
1
This section applies if a company carrying on a trade (“the contributor”) incurs expenses in making a contribution (whether in cash or in kind)—
a
to a local enterprise organisation (see section 83), or
b
to an urban regeneration company (see section 86),
and a deduction would not otherwise be allowable for the expenses in calculating the profits of the trade.
2
In calculating the profits of the trade, a deduction is allowed under this section for the expenses.
3
But if, in connection with the making of the contribution, the contributor or a connected person—
a
receives a disqualifying benefit of any kind, or
b
is entitled to receive such a benefit,
the amount of the deduction is restricted to the amount of the expenses less the value of the benefit.
4
For this purpose it does not matter whether a person receives, or is entitled to receive, the benefit—
a
from the local enterprise organisation or urban regeneration company concerned, or
b
from anyone else.
5
Subsection (6) applies if—
a
a deduction has been made under this section, and
b
the contributor or a connected person receives a disqualifying benefit that is in any way attributable to the contribution.
6
An amount equal to the value of the benefit (so far as not brought into account in determining the amount of the deduction)—
a
is brought into account in calculating the profits of the trade, as a receipt arising in the accounting period in which the benefit is received, or
b
if the contributor has permanently ceased to carry on the trade before the benefit is received, is treated as a post-cessation receipt (see Chapter 15).
7
In this section “disqualifying benefit” means a benefit the expenses of obtaining which, if incurred by the contributor directly in a transaction at arm's length, would not be allowable as a deduction in calculating the profits of the trade.
Pt. 3 modified (1.1.2010) by Northern Rock plc (Tax Consequences) Regulations 2009 (S.I. 2009/3227), regs. 1, 4(1)