Why are the premiums for Keyperson Insurance on Newstead Limited's chief executive not deductible for Corporation Tax purposes?

The reason the premiums for Keyperson Insurance on Newstead Limited's chief executive are not deductible for Corporation Tax purposes is linked to the chief executive's substantial shareholding in the company. Under tax laws, premiums paid for life insurance policies where the insured person holds a significant shareholding (usually defined as 5% or more) in the company are not deductible as a business expense. This is because the premiums are considered a personal expense rather than a legitimate business cost. The rationale behind this rule is that the insurance benefits would eventually flow back to the shareholder (in this case, the chief executive), creating a bias in favor of the shareholder rather than serving a direct business purpose.

The other options do not directly address the tax treatment of the insurance premiums based on ownership interests, making the substantial shareholding the decisive factor in this scenario.