CTM08320 | Corporation Tax: management expenses: insurance premiums

Premiums for the insurance of assets used in the management of a ‘company with investment business’) will generally be management expenses within CTA09/S1219. But premiums for the insurance of the investments themselves do not qualify for relief. The courts have interpreted restrictively the phrase ‘expenses of management’, laying emphasis on expenses of management as distinct from expenses of general administration of the business. There is guidance on this distinction at CTM08160. The cost of insurance against loss of particular investments is not even a general expense of conducting the investment company's business.

Directors and employees

Premiums on policies on the lives of directors and employees are unlikely to qualify as management expenses, except where they may be regarded as part of the directors' or employees' remuneration. A deduction will be due to an investment company employer for premiums payable under a policy of permanent health insurance that provides only income benefits when

• the insurance provides direct benefits to employees, or

• the proceeds accrue in the first instance to the employer, provided the benefits will be passed on to the employees.

The general principle that the amount of benefits should be reasonable in the light of the duties performed and the services rendered by the employee must be applied in all cases (see CTM08170). A deduction for premiums in respect of employees will be admissible only to the extent that their wages qualify as management expenses.