CTM08330 | Corporation Tax: management expenses: directors' remuneration

That sums of money are paid to the directors of a ‘company with investment business’ as remuneration does not mean conclusively that they qualify as management expenses under CTA09/S1219. In deciding whether such sums are allowable similar principles to trading company remuneration apply, but bearing in mind there is no explicit ‘wholly and exclusively’ test in CTA09/S1219. There is guidance at CTM08170 on this. and on the remuneration of directors and close relatives of directors at BIM47105.

When considering whether the sums of directors' remuneration were expenses of management the case of L G Berry Investments Ltd v Attwooll (1961-1964) 41TC547 is helpful. Plowman J said the Special Commissioners were entitled to examine whether a management expense was 'reasonable, having regard to the requirements of the company's business and, in the case of directors' fees or other payments for services, to the actual services rendered to the company'. The contemporary legislation in that case was ITA52/S425 (1), which included provisions similar to both CTA09/S1219 and CTA09/S1218B.

There is guidance at CTM08470 on the timing of the deduction for remuneration and the application of CTA09/S1249 and S1250 .