Pension provisions made by two companies were not wholly and exclusively for the purposes of their trades as the primary purpose of entering into the pension arrangements was to reduce their liability to tax without incurring any actual expenditure.

The first appellant provided civil engineering and groundwork contracting services. The second appellant was engaged in the wholesale travel agency business. The appellants entered into contractual arrangements with directors and key employees which implemented an unfunded unapproved retirement benefit scheme (UURBS), under which the appellants promised to provide those employees with a pension in the