CTM08150 | Corporation Tax: management expenses: general

CTA09/S1219

The legislation on management expenses originates in FA1915. Related case law does not provide ready answers, but does provide useful guidance on what constitutes an expense of management. The principles apply for all periods, both before and from the 1 April 2004 legislative changes.

As a general rule, expenses will be allowable only if they are referable to managing the company’s investment business and not merely expenses arising from management. In Capital and National Trust Ltd v Golder (1949) 31 TC 265 at page 273, Tucker LJ said the focus is the expenses of management, not expenses incurred by the management in carrying out the proper business of the company.

The requirement that expenses must be incurred in managing the investment business is now spelt out in the new legislation at CTA09/S1219 (1) and (2)(a). The legislation also introduces an unallowable purpose test, see CTM08210.

There is no wholly and exclusively requirement for S1219 as discussed at CTM08170 and, for periods up to 31 March 2004, capital expenditure could be an expense of management if it otherwise met the relevant criteria.

There is a general exclusion of expenses that are otherwise deductible in computing profits, S1219 (3)(b).

Expenses of management exclude payments that are deductible against total profits as a charge on income (now a small category, see CTM09000 onwards).

The main points from case law on management expenses are discussed at CTM08160.