wholly, reasonably, exclusively necessarily
In essence, the expense must be wholly, reasonably, exclusively and necessarily incurred during that period for the purpose of generating the profits of the business. We can create a package that’s catered to your individual needs. The appellant argued that Section 24 is the relevant section to determine the deductibility of the expenses in question while section 27(i) only speaks to expenses incurred outside Nigeria on behalf of another company. See more. In any case, the ambiguity in the provision will be resolved in favour of the taxpayer. Wholly and exclusively Broadly, under ITTOIA 2005 s 34, when calculating trading profits no deduction is allowed for expenses not incurred wholly and exclusively for the purposes of the trade. depreciation, capital expenditure, etc. Wholly and exclusively ― the basic principles The ‘wholly and exclusively’ test can only be satisfied if the sole reason for incurring the expenditure is for the purposes of the trade in question. The basis of TAT’s decision are provided below: The TAT ruling is a judicial breakthrough and a welcome relief to lots of companies who incur a substantial portion of their expenses outside Nigeria. Like any business expense, to be an allowable deduction against profits, pension contributions have to be made wholly and exclusively for the purposes of the business. Consequently, Nigerian companies are increasingly involved in business activities abroad in order to remain competitive in today’s business environment. This helps to enhance economies of scale, operational flexibility and competitiveness. Exclusive definition is - excluding or having power to exclude. (ii) Penalties and fines that are avoidable; not dictated by business end or incidental to business cannot be held to be wholly, reasonably, exclusively and necessarily incurred in the making of profits and therefore tax deductible. Did You Know? Nigerian companies are therefore advised to take note of the principles established in this case and ensure relevant supporting documentary evidence is in place to satisfy the WREN test for tax deductibility of expenses incurred by them in generating business profits. Removing any expense from this general rule would require a specific provision and clearly, section 27(i) does not satisfy this. While allowing the respondent company's claim, the learned Tribunal relied on a decision of the Calcutta High Court, in Assam Brooke Ltd. wherein a sum of Rs. The details of the conditions are specified below: The CITA goes further to give examples of expenses that would typically pass the WREN test such as interest on loan, staff costs, repairs, rent, etc., as well as those that would not e.g. FUND MANAGEMENT: I ensured that programs funds are judiciously utilized following cost principles of wholly for the purpose of achieving program objectives, reasonably, exclusively and necessarily (WREN)are strictly adhered. Tax deductibility of expenses incurred outside Nigeria: Are days of arbitrary awards over? As a result, this case turned on whether the accommodation and travel expenses were wholly and exclusively incurred by Taylor for the purposes of his trade. Dividing Costs – Mental Models for Business Expenses. Practical Payroll and Benefits – Bradford, 11-105 Wholly, exclusively and necessarily. PROCUREMENT: ensured that vendors were pre-qualified and maintained. 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