Readers’ forum: Is tax deduction allowable on stolen employee benefit trust funds?

Employee benefit trust

A client company that is still trading paid a £200 000 contribution to an employee benefit trust (EBT) which was loaned to a director via a subtrust.

The director repaid the loan before 5 April 2019 to avoid the loan charge.

It transpires that the trustee company now in liquidation misappropriated these funds and they are unlikely to be recovered.

Can the company claim a corporation tax deduction for this loss? My understanding is that employee thefts would be allowable but not directors. In this case it is neither and it is not a loan relationship.

Had the funds not been stolen the amounts would have been paid out over a number of years including PAYE/NIC and a tax deduction claimed at that point. It therefore seems harsh that the company cannot claim a tax deduction for its loss which arose during its ordinary...