CTM08005 - Corporation Tax: management expenses: introduction

CTA09/PART16

In 1915 (FA1915/S14) legislation provided investment companies and certain life insurance companies with tax relief for management expenses.  The aim of the legislation was to put investment companies into a broadly similar position to trading companies.  The statutory provisions remained essentially unchanged until 2004.

Changes have affected the following broad areas:

  • To be eligible for relief for expenses of management, a company must be a ‘company with investment business’, as defined in CTA09/S1218B;
  • The number of companies qualifying for relief for management expenses is now more extensive as the definition is less restrictive;
  • The statutory test states that relief is given for expenses of management of the investment business;
  • There is a specific exclusion for capital expenditure, CTA09/S1219 (3)(b);
  •  There is no relief where assets are held for an unallowable purpose CTA09/S1219 (2)(b) and S1220;
  • There is a targeted anti-avoidance rule (TAAR), CTA09/S1248;
  • The timing of the  relief broadly follows the accounts, CTA09/S1224;
  • Where a company receives a credit for sums that have previously been allowed as management expenses, that credit can be charged to CT, CTA09/S1229;
  • Relief for the management expenses of insurance companies has been completely decoupled from that for other companies with investment business and is now to be found in FA12/PART2/CHAPTER1.

The legislation was rewritten and consolidated in CTA09. The guidance which follows covers only the new legislation from 2004 in its rewritten form.  Copies of previous guidance covering the pre-2004 legislation (and the application of the transitional provisions) can be obtained from BAI (Technical) along with details of the legislative references from 2004 to 2009.