B, I think that your interpretation of the point of the expenditure is too narrow. I invite you to consider what would be the implications of NOT paying the tax on business profits..?
The following is an extract from BIM37300, in relation to some Argentinian tax paid on an overseas PE:
The Courts considered the meaning of the words ‘for the purposes of the trade’ in the case of Harrods (Buenos Aires) Ltd v Taylor-Gooby  41 TC 450. The case concerned a UK company trading in Argentina. The company was required to pay an Argentine ‘substitute tax’ (not an income tax) which was charged annually on a percentage of the company’s capital, whether or not there were profits chargeable to Argentine income tax. The courts held that the tax paid was an allowable deduction.
In the Court of Appeal, Danckwerts LJ, said that he found it difficult to follow Lord Greene’s view expressed in Rushden Heel Ltd v Keene  30 TC 298 (see BIM37060) of a distinction between payments made by a trader in the character of taxpayer and not, or not wholly, as trader. Danckwerts expressed the guiding principle in the following terms. If the payment is made:
•for the purpose of gaining the company profits - it is deductible
•after the profit has been ascertained - it is not a deduction from but an application of profit
Diplock’s judgment explains how the ‘capacity’ test is to be applied. But you should always remember that the statutory test is whether the expense is laid out for the purposes of the trade. Identifying the capacity in which a taxpayer incurs an expense is a means to an end, the end being to decide what is the true purpose of the expenditure.
Diplock LJ asked for what purpose the company had expended the money. If not for the purpose of the trade, then for what? Diplock said that the evidence found by the Commissioners pointed to no other purpose. Diplock went on to explain why the so-called ‘capacity’ test is of doubtful utility in 41 TC starting on page 468:
`…the only question here is: was the money paid by the Company in settlement of its liability for Argentine substitute tax, “money wholly and exclusively expended for the purposes of the trade” which it carried on in the Argentine? In order to engage lawfully in its trading activities in the Argentine at all, whether or not it made a profit by doing so, it had to pay the substitute tax. That was the purpose for which the money was expended by the Company. None other is suggested. Why, then, is it not deductible?
It is contended for the Crown that the Company paid the tax in its capacity as a taxpayer, not in its capacity as a trader. But with great respect to Lord Greene, MR's judgment in the Rushden Heel Co's case [see BIM37060], on which this contention was mainly based, this is merely playing with words. As pointed out by Willmer, LJ, this ratio decidendi was not adopted by the House of Lords in the same case and cannot, in my view, survive Lord Atkinson's earlier criticism of a similar argument in the Lion Brewery case [5 TC 568], which Willmer, LJ, has already cited. You can always find some label other than “trader” to describe the capacity in which a trader makes any disbursement for the purposes of his trade. He pays rent for his business premises in the capacity of “tenant”, rates in the capacity of “occupier”, wages in the capacity of “employer”, the price of goods in the capacity of “buyer”. But if he has become tenant or occupier of those particular premises, employer of those particular servants or buyer of those particular goods solely for the purposes of his trade, the money which he has expended in any of the capacities so labelled is a deductible expense in computing the profits of his trade.’
S, the case bears scrutiny in full. But it seems that HMRC is in accord with the sentiment.