Establish why the payment was made

Payment to facilitate business winding up

The trade purpose test is unlikely to be met where a payment is made for the purposes of winding up or disposing of a business (CIR v Anglo Brewing Co Ltd [1925] 12 TC 803, see BIM38310).

Where, by contrast, a payment is wholly and exclusively to secure employee co-operation during the period of trading (as in O'Keefe v Southport Printers Ltd [1984] 58 TC 88, see BIM38320) it is an allowable deduction.

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