Commentary

B2.419 Contracts—compensation for variation

Business tax
Business tax | Commentary

B2.419 Contracts—compensation for variation

Business tax | Commentary

B2.419 Contracts—compensation for variation

Payments made in connection with the variation of a contract must be examined carefully to determine whether there is any capital connection with the payment, which would be disallowable for trading purposes. There are many cases dealing with this matter, some of which are outlined below.

Deductible payments for varying a contract

The following have been held to be deductible:

  1.  

    (a)     a sum paid to secure the termination of the office or employment of a director or employee1, unless it is in substance a capital transaction such as a distribution of profit, or part of the consideration

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