What conditions must a body meet to be approved as a local enterprise agency under ITTOIA 2005 section 84?

Two conditions must both be satisfied. Condition A requires the body's sole or main aim to be promoting local enterprise, meaning industrial and commercial activity in a particular UK area with emphasis on encouraging small business creation and growth. Condition B requires the body to be precluded from distributing income or profit to its members or controllers.

Does a body need to be called a local enterprise agency or have a specific legal structure to gain approval under section 84?

No. The legislation makes clear that it does not matter what legal form the body takes or whether it actually calls itself a local enterprise agency. Provided both Condition A and Condition B are satisfied, the relevant national authority may approve it regardless of its structure, status, or name.

What happens if local enterprise is only one of a body's main aims rather than its sole aim?

If promoting local enterprise is one of several main aims rather than the sole aim, the body must have or be about to establish a separate ring-fenced fund dedicated entirely to pursuing the local enterprise aim. This separate fund requirement ensures that contributions intended for enterprise support are properly directed toward that purpose.

Are any payments by an approved local enterprise agency permitted under Condition B's restriction on distributing income or profit?

Yes. Condition B excludes reasonable commercial payments from its restriction. The body may pay reasonable remuneration for goods, labour, power, or services rendered, reasonable interest on money lent to it, and reasonable rent for premises it occupies. These ordinary commercial transactions are not treated as prohibited distributions of income or profit.

Income Tax (Trading and Other Income) Act 2005 section 84

Approval of local enterprise agencies

Section 84 sets out the conditions that must be met before a body can be approved as a local enterprise agency for the purposes of obtaining a tax deduction for contributions under section 82.

The relevant national authority may approve a body as a local enterprise agency only if two conditions (A and B) are both satisfied, regardless of the body's legal structure or name
Condition A requires that the body's sole aim, or one of its main aims, is the promotion of local enterprise — meaning industrial and commercial activity in a particular UK area, with a focus on encouraging small business formation and development
Condition B requires that the body is prevented from paying or transferring any of its income or profit, directly or indirectly, to its members or those who control and direct its affairs
Reasonable payments for goods, labour, power, services, interest on loans, or rent for premises are excluded from the restriction on distributing income or profit

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member