Allowable expense

A client trades in used plant and equipment. He has an arrangement to share the profits made on some of the transactions by way of commission to a third party who helped to source the goods or provided contacts of purchasers. The commission has been shown as a cost in the trader’s accounts but has not yet been paid over.

It appears that this may be because an invoice has yet to be received. Perhaps I should also mention that there is a family relationship between my client and the third party although I understand that work has genuinely been carried out to earn the commission.

There is some anxiety that the intended recipient of these commission amounts has yet to report them as earnings to HMRC and pay the tax. Would this failure render the cost in the trader’s accounts to be non-deductible for tax purposes?

This...