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HMRC internal manual

International Manual

Distribution exemption: Interpretation: management expenses

Interaction with management expenses

Management expenses will not be incurred for an unallowable purpose solely because they are incurred in connection with a UK or foreign shareholding.

Withholding tax deducted from a dividend may not be included in management expenses irrespective of whether the dividend is taxable, for two reasons:

  • withheld tax is not an expense of managing investments
  • if no credit is available in respect of the tax withheld, it is deducted from the exempt income in accordance with TIOPA10/S112 (see INTM655050 regarding the calculation of FII).