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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: capital exclusion - periods starting on or after 1 April 2004

CTA09/S1219 (3)(a) now specifically provides that expenditure of a capital nature does not count as expenses of management under the general rules. This provision does not apply to capital sums that are treated as expenses of management under a provision outside Section 1219, or to amounts representing capital allowances treated as expenses of management under Section 1233.

The capital/revenue divide applies across all heads of charge. See BIM35000 onwards for details of this issue in the Case I context.

The fact that the investments of a company with investment business are likely to be held on capital account does not create a presumption that the expenses of managing those investments are themselves capital. Ordinary recurring expenditure which otherwise satisfies the tests in Section 1219 is very unlikely to be of a capital nature. For example, we would generally expect regular, ongoing costs of employment of staff in a department managing a company’s investment business to be non-capital.

It is also worth noting that if expenses are debited in a statement of ‘capital’ profits and losses in financial accounts, or in a statement that combines revenue and ‘capital’ items, that does not in itself exclude them from deduction as expenses of management.

For details of where the capital/revenue divide might fall in the context of acquisitions and disposals, see CTM08260.