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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Corporation Tax: management expenses: raising finance - periods ending on or before 31 March 1996


An investment company’s expenses on:

  • commitment fees,


  • guarantee commissions,

are properly seen as part of the cost of raising capital, and not management expenses within ICTA88/S75. The authority for this treatment is in:

  • London County Freehold and Leasehold Properties Ltd v Sweet 24TC412,


  • Hoechst Finance Ltd v Gumbrell 56TC594.

However ICTA88/S77 provided relief, as an expense of management, for the incidental costs of obtaining business finance through:

  • a qualifying loan,


  • the issue of qualifying loan stock,

for periods ending up to 31 March 1996. For subsequent periods similar relief is provided under the loan relationships legislation (FA96/S84). For details of the loan relationships legislation see the Corporate Finance Manual.

For periods before the loan relationships legislation applies, an issue arose as to the timing of relief for the incidental costs of raising finance where FRS4, which applied to accounting periods ended after 22 June 1994, dictated that for accounts purposes the expenses should be spread over the term of the loan. For trading companies the accounting treatment was followed. For an investment company, however, relief is available in the period for which the expenditure is disbursed.

In Cadbury Schweppes PLC v Williams SPC302 the Special Commissioners found, on the facts, that the sums were disbursed for the period in which the loan was taken out and thus relief was available in full in that period, despite the accounting treatment.