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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: directors' remuneration

The fact that sums of money are paid to the directors of an investment company (or a ‘company with investment business’ for periods starting on or after 1 April 2004) as remuneration does not mean conclusively that they qualify as management expenses under ICTA88/S75. When you decide whether such sums are allowable you should take broadly the same approach as you do for trading companies, but bear in mind there is no explicit ‘wholly and exclusively’ test in Section 75 (1). There is guidance on this at CTM08170. There is guidance on the remuneration of directors and close relatives of directors at BIM47105.

You have to consider whether the sums of directors’ remuneration were expenses of management. The tax case of L G Berry Investments Ltd v Attwooll 41TC547 is about whether directors’ fees were allowable as expenses of management. In this case Plowman J said the Special Commissioners were entitled to examine whether a management expense was ‘reasonable, having regard to the requirements of the company’s business and, in the case of directors’ fees or other payments for services, to the actual services rendered to the company’. The legislation in that case was ITA52/S425 (1), which included provisions similar to both ICTA88/S75 (1) and ICTA88/S130.

There is guidance at CTM08470 on the timing of the deduction for emoluments and the application of FA89/S44.