Background
The appellant company operated a family-owned hotel business, which was established by an individual (JF). The appellant was owned by JF’s daughters, one of whom (EP) was also the sole director. However, JF ran the business and was the main decision maker. Each of the six hotels owned by the appellant was run by a ‘manager’ under ‘incentive arrangements’ to encourage the managers to maximise the profits of the business by giving them a share of it.
In 2008, JF put an agreement in place between the appellant and AP (his granddaughter and the daughter of EP), under which the appellant sponsored AP in her motor sports activities in return for her undertaking various promotional and advertising activities in relation to the hotels.
Following enquiries into the appellant’s tax returns for its 2011 and 2012 accounting periods, HM Revenue and Customs (HMRC)
