What does Corporation Tax Act 2009 section 82 allow?

Section 82 allows a trading company to deduct the cost of contributions, whether in cash or in kind, made to local enterprise organisations or urban regeneration companies when calculating trading profits. This applies even where the contribution would not otherwise qualify as a deduction under normal trading principles, because it is not incurred wholly and exclusively for the purposes of the trade.

What is a disqualifying benefit under section 82 CTA 2009?

A disqualifying benefit is any benefit where, if the company had incurred the cost of obtaining it directly in an arm's length transaction, that cost would not have been allowable as a trading deduction. If the benefit would have been deductible as a normal trading expense, it is not a disqualifying benefit and does not restrict the relief available under section 82.

How is the deduction reduced when a disqualifying benefit is received?

If the company or a connected person receives or becomes entitled to receive a disqualifying benefit in connection with the contribution, the deduction is reduced by the value of that benefit. It does not matter whether the benefit comes from the recipient organisation or from any other party. The restriction ensures relief is limited to genuine contributions.

What happens if a disqualifying benefit is received after the deduction has been claimed?

If a disqualifying benefit attributable to the contribution is received after the deduction has been claimed, its value — to the extent not already taken into account — is treated as a taxable trading receipt in the accounting period in which it is received. If the company has permanently ceased trading, the amount is instead treated as a post-cessation receipt.

Corporation Tax Act 2009 section 82

Contributions to local enterprise organisations or urban regeneration companies

Section 82 allows a tax deduction for contributions made by a trading company to local enterprise organisations or urban regeneration companies, subject to restrictions where benefits are received in connection with the contribution.

A company carrying on a trade may deduct the cost of contributions (in cash or in kind) to local enterprise organisations or urban regeneration companies, even where the expenditure would not otherwise qualify for a deduction
If the company or a connected person receives or is entitled to receive a disqualifying benefit in connection with the contribution, the deduction is reduced by the value of that benefit
If a disqualifying benefit attributable to the contribution is received after the deduction has been claimed, the value of that benefit (to the extent not already taken into account) is treated as a taxable trading receipt, or as a post-cessation receipt if the trade has permanently ceased
A disqualifying benefit is one where the cost of obtaining it directly at arm's length would not itself be allowable as a trading deduction

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