Management expenses

Produced by Tolley
Management expenses

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Management expenses
  • Relief for management expenses
  • Which companies may deduct management expenses?
  • What general categories of expenditure will be treated as management expenses?
  • Items treated as management expenses
  • Restrictions on the deduction of management expenses
  • Unallowable purpose
  • Accounting period to which management expenses relate
  • Clawback of management expenses

Relief for management expenses

Which companies may deduct management expenses?

A deduction for management expenses is available for companies with investment business as well as those qualifying as investment companies, plus non-UK resident companies. The inclusion of companies with an investment business is important for companies who hold shares in subsidiaries as well as having their own separate trade.

Expenses of management of the company’s investment business which are referable to an accounting period are allowed as a deduction from the company’s total profits. The expenses are ‘referable’ to that accounting period when they are debited to a company’s accounts in the profit and loss account or income statement, the statement of recognised gains or losses, or statement of changes in equity in accordance with GAAP. See ‘Accounting period to which management expenses relate’ below for more information on this.

What general categories of expenditure will be treated as management expenses?

As a general rule, expenses will be allowable only if they relate to managing the company’s investment business and notmerely expenses arising from management.

An investment company which has subscribed for ordinary shares in a qualifying trading company and which incurs a loss on the disposal of those shares, may claim to set the loss against its income for corporation tax purposes, instead of against its chargeable gains. For details of these rules, see Simon’s Taxes D7.312.

Any expenses which are deductible against the company’s profits under the normal rules are nottreated as management expenses. For example, if the business is a rental business, any expenses that are directly attributable to that activity will notbe included as management expenses.

Expenses of a capital nature, such as those incurred in connection with the acquisition or disposal of investments, are notdeductible as management expenses unless they fall within any of the expenses included in CTA 2009, s 1221.

Any expenses that relate to interest on loans used to fund the investment are relieved as a debit

Popular documents