Annex 1: Minor changes in the law Change 28: Community investment tax relief: permit deduction of expenses incurred by director, employee or associate: section 250
This change permits consideration given by a director or employee of an investor or by an associate of such a director or employee for a benefit or facility provided by the CDFI to be deducted in calculating value received.
Paragraph 35 of Schedule 16 to FA 2002, rewritten in section 249, provides for the circumstances in which the investor receives value from the CDFI for the purposes of determining whether any CITR falls to be reduced or withdrawn.
One of those circumstances (paragraph 35(1)(d)) is the provision by the CDFI of a benefit or facility for:
“(i)the investor or any associates of the investor, or(ii)directors or employees of the investor or any of their associates.”
Associate is defined in paragraph 50 of Schedule 16 to FA 2002, rewritten in section 268.
Paragraph 36(d) of Schedule 16 to FA 2002 determines the amount of the value received in a case falling within paragraph 35(1)(d) as:
“(i)the cost to the CDFI of providing the benefit or facility, less(ii)any consideration given for it by the investor or any associate of the investor.”
But paragraph 36 does not permit the deduction of any consideration:
“in a case where the benefit or facility is provided to a director or employee, given by the director or employee or by any associate of the director or employee, orin a case where the benefit or facility is provided to an associate of a director or employee, given by the associate or by the director or employee.”
As the consideration is most likely to be given by the recipient of the benefit or facility, this may put the investor in a worse position if the benefit or facility is provided to a director or employee or an associate of a director or employee than if the benefit or facility is provided to the investor itself or an associate of the investor.
In rewriting paragraph 36(d) of Schedule 16 to FA 2002 in section 250 this omission has been rectified.
This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.