CTM08250 | Corporation Tax: management expenses: capital exclusion - periods starting on or after 1 April 2004

CTA09/S1219 (3)(a) now specifically provides that expenditure of a capital nature does not count as expenses of management under the general rules. This provision does not apply to capital sums that are treated as expenses of management under a provision outside S1219, or to amounts representing capital allowances treated as expenses of management under S1233.

The capital/revenue divide applies across all heads of charge. See BIM35000 onwards for details of this issue in the trading income context.

The fact that the investments of a company with investment business are likely to be held on capital account does not create a presumption that the expenses of managing those investments are themselves capital. Ordinary recurring expenditure which otherwise satisfies the tests in S1219 is very unlikely to be of a capital nature. For example, it would generally be expected that regular, continuing costs of employment of staff in a department managing a company's investment business would not be capital in nature.

Note also that if expenses are debited in a statement of ‘capital’ profits and losses in financial accounts, or in a statement that combines revenue and ‘capital’ items, this does not in itself exclude them from deduction as expenses of management.

For details of where the capital and revenue divide might fall in the context of acquisitions and disposals, see CTM08260.