CTM08610 | Corporation Tax: management expenses: order of set-off

A company can be 'a company with investment business' within CTA09/S1218B and also carry on a trade. So a company may be entitled to management expenses under CTA09/S1219 and have trading losses available for relief under CTA10/S37.

Trading losses

Management expenses under CTA09/S1219 (but excluding carried-forward management expenses) must be deducted before any losses under CTA10/S37 may be set off. This is because:

• the deduction of management expenses is mandatory in the computation of the total profits (CTM08580),

but

• the company may make a claim for the set-off of trade losses against those profits.

Qualifying charitable donations

CTA10/S189 (1) and (2) allow the deduction of charges on income from a company’s total profits (as reduced by any other relief except group relief) in computing CT chargeable for an accounting period.

CTA10/S189 (4) allows the deduction only in respect of payments made by the company in the accounting period concerned and CTA10/S189 (3) limits the deduction to the amount that reduces the company’s total profits for the period to nil.

Any excess of qualifying charitable donations (that is, an amount that cannot be deducted under CTA10/S189 because there are insufficient total profits) is added to any excess management expenses of the period and is carried forward to the next accounting period and treated as an expense of management of that period.