Corporation Tax: management expenses: introduction
In 1915 new 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 an 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 Part 2, Chapter 1 FA12.
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 the editor along with details of the legislative references from 2004 to 2009 if required.