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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: company status - parent or holding companies


The parent, or holding, companies of groups can, for the most part, be divided into three broad categories:

  • those which carry on the mainstream trading activities of their group,
  • those whose income consists only of dividends, interest and rents from their subsidiaries, and
  • those whose income also includes management charges paid by their subsidiaries.

There is also, however, a small fourth category of so-called ‘hybrid’ companies which have trades other than just the provision of management services running alongside the management functions. These companies were not likely to qualify as investment companies up to 31 March 2004 because of the extent of their trading activities.

Periods from 1 April 2004

For accounting periods beginning on or after 1 April 2004 it is likely that all but the pure trading company would be ‘companies with investment business’ and eligible to claim relief for management expenses.

However whether or not a comapny has a business at all will still be an issue. There is guidance at CTM08180 on expenditure by an investment company that relates to the business or trades of other companies in the group.

There is guidance at CTM08180 and CTM08260 where a holding company incurs expenses in connection with a take-over bid and at CTM08200 where a holding company incurs bid defence costs.