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HMRC internal manual

Company Taxation Manual

HM Revenue & Customs
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Corporation Tax: management expenses: meaning of ‘disbursed’

ICTA88/S75 for periods up to 31 March 2004

For accounting periods up to 31 March 2004, relief was available for expenses which had been ‘disbursed for’ the accounting period. The meaning of that phrase is considered below. However for periods starting on or after 1 April 2004 an expense is allowable in an accounting period if it is ‘referable to’ that accounting period. The meaning of the latter phrase is considered in CTM08560.

To qualify for a deduction in an accounting period up to 31 March 2004, the sums must be disbursed as management expenses for that period. ‘Disbursed’ is an old-fashioned word that has been carried through from the original legislation. It simply means that before a deduction is due the expenses:

  • must actually be paid out,
  • must be incurred for the accounting period,
  • they do not have to be paid in the accounting period for which they are disbursed.

So, while the entitlement to relief depends on disbursement, generally the timing of relief does not depend on when an expense is paid out. In deciding for which accounting period a sum has been paid out, we will consider whether payments made in a later accounting period can be regarded as paid out for an earlier period. Thus we allow accruals (subject to the rules for specific deductions above) but the position for provisions is more complicated.

To be allowable a provision must be disbursed, i.e. paid out as an expense of management for the period. If payments are made against a provision, before the assessment becomes final then the company can have relief. There is a difference in treatment for management expenses between provisions where money is actually paid or likely to be paid out (which could be allowable) and those where money is never likely to paid out, for example some general provisions, provisions against the values of assets or bad debt provisions.

Accountancy treatment is generally not relevant with regard to claims to management expenses, i.e. as to whether an item is or is not an expense of management (see CTM08150).

You should refer to the following guidance about the timing of specific deductions:

  • for the costs of setting up approved employee share schemes CTM08390,
  • for emoluments under FA89/S44 CTM08470.

For the timing of relief for the costs of obtaining loan finance for accounting periods ending on or before 31 March 1996) see CTM08300.