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Company pension provisions were not wholly and exclusively for trading purposes

By Mark McLaughlin, July 2024

The First-tier Tribunal did not make an error of law in deciding that 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 future.  

The pensions were calculated by reference to estimated profits for the relevant year. In each case, the aggregate amount of the pensions was set at 80% or 100% of the estimated pre-tax profits. Both companies

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