D7.559 Exclusions from expenses payable
The rules in this division apply for accounting periods beginning before 1 January 2013. For accounting periods beginning on or after 1 January 2013 see Division D7.4.
The body of case law which has over time clarified and restricted the definition of management expenses has no application to ICTA 1988, s 76. It has therefore proved necessary to make explicit in the legislation certain exclusions from the definition of expenses payable to restore the position as it previously existed. At the same time steps have been taken to carve certain other costs out of the regime. For this reason reinsurance premiums (which might normally be accounted for on Form 41 of the FSA return) are excluded1 as are refunds of premiums2 (which are a form of policy holder benefit which case law had previously established was not an expense of management).
The legislation also seeks to deny relief for three types of transaction that have in the past been used for tax avoidance purposes.
The first of these, denying relief for profit commissions and profit participations3, is designed to target transactions which result in the parties sharing in the profit arising.
The second and more controversial is the denial of