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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: Schedule A

FA98/S39 & FA98/SCH5

Where an investment company has profits assessable under Schedule A, some part of the emoluments of employees and directors may refer to the management of the properties. That part of the emoluments should be deducted in the computation of the Schedule A profits, and not as an expense of management under ICTA88/S75.

You should ensure that any excessive remuneration paid to directors for their duties in connection with the company’s properties is not allowed for Schedule A purposes. For instructions on how to deal with excessive remuneration in a management expenses claim see CTM08370.

The computation of profits assessable under Schedule A often includes emoluments and other expenditure accrued in the company’s accounts. In such a case of accrued expenditure you apply the rules in FA89/S44 to the emoluments which are deductible under ICTA88/S75. There is guidance on the rules in FA89/S44 at CTM08470.

If you have a case of a property investment company where there is likely to be difficulty in agreeing the amount of admissible management expenses, you should make a clear distinction between:

  • those items which the company claims as deductions in the computation of Schedule A income, and
  • the management expenses under ICTA88/S75.

The distinction is important because:

  • expenses deductible in the computation of Schedule A income cannot be deductible as management expenses under Section 75

There is guidance on appeals at CTM08600.