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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: pension contributions: capital expenditure

Capital expenditure is excluded from being an expense of management for expenditure incurred after 1 April 2004. However this exclusion is overridden by FA04/S196(3). Therefore pension contributions which may appear capital in nature are not excluded from being expenses of management for that reason alone.

Whilst the capital exclusion is overridden, the expenditure does still have to satisfy the remaining requirements of S75. In particular, the expenditure must be in respect of the investment business of the company making the contribution (S75(4)). This is different from the wholly and exclusively rule for trading deductions, which does not apply to consideration of expenses of management. There is further guidance on this at CTM08344 and in the particular context of multi-employer schemes at CTM08353.

The costs of setting up a registered pension scheme do not fall within FA04/S196; the capital exclusion in S75 therefore continues to apply to such expenditure in the normal way. If for example the expenditure were capital in nature it could not be an expense of management as it would be precluded by S75(3).