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HMRC internal manual

Company Taxation Manual

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Corporation Tax: management expenses: general

ICTA88/S75 has a long history. The decided cases do not provide ready answers, but they do give some guidance as to what constitutes an expense of management. These will apply for periods both before and after 1 April 2004.

As a general rule, expenses will be allowable only if they are referable to managing the company’s investment business and not merely expenses arising from management. In Capital and National Trust Ltd v Golder 31TC at page 273, Tucker LJ said What we are concerned with here is the expenses of management, not expenses incurred by the management in carrying out the proper business of the company.

The requirement that expenses must be incurred in managing the investment business is now spelt out in the new legislation at ICTA88/S75 (4)(a). The legislation also introduces an unallowable purpose test, see CTM08210.

There is no wholly and exclusively requirement for Section 75 as discussed in CTM08170 and, for periods up to 31 March 2004, capital expenditure could be an expense of management if it otherwise met the relevant criteria.

There is a general exclusion of expenses that are otherwise deductible in computing profits. For periods up to 31 March 2004 this was contained in Section 75 (1) and from 1 April 2004 it is in Section 75 (2).

Do not allow as an expense of management a payment that is deductible against total profits as a charge on income (see CTM09000 onwards for details of charges).

The main points from cases on management expenses are discussed at CTM08160.