Direct Tax Acts, Finance Act 2018

83 Expenses of management of investment companies
CTA76 s15; FA03 s41

(1) For the purposes of this section and of the other provisions of the Corporation Tax Acts relating to expenses of management, “investment company” means any company whose business consists wholly or mainly of the making of investments, and the principal part of whose income is derived from the making of investments, but includes any savings bank or other bank for savings.

(2) In computing for the purposes of corporation tax the total profits for any accounting period of an investment company resident in the State -

(a) there shall be deducted any sums disbursed as expenses of management (including commissions) for that period, except any such expenses as are deductible in computing income for the purposes of Case V of Schedule D; but

(b) there shall be deducted from the amount treated as expenses of management the amount of any income derived from sources not charged to tax, other than franked investment income.

(3) Where in any accounting period of an investment company the expenses of management deductible under subsection (2), together with any charges on income paid in the accounting period wholly and exclusively for the purposes of the company’s business, exceed the amount of the profits from which they are deductible, the excess shall be carried forward to the succeeding accounting period, and the amount so carried forward shall be treated for the purposes of this section […]1, including any further application of this subsection, as if it had been disbursed as expenses of management for that accounting period.

(4) For the purposes of subsections (2) and (3), there shall be added to a company’s expenses of management in any accounting period the amount of any allowances to be made to the company for that period by virtue of section 109 or 774.

(5) […]2

(6) […]2

Go to Revenue Guidance Notes on TCA

Amendments

1,2 Deleted by FA03 s41(1) as respects accounting periods ending on or after 6 February 2003

Revenue Guidance

Expenses of management of investment companies: clarification on non-deductibility of interest payments on capital borrowings as an expense of management – eBrief No. 50/15

Case Law

Expense of Management

Whether an amount that company was required to pay under arrangements which was representative of dividend constituted expenses of management - First Nationwide v R&CC [2010] SFTD 408

Whether business of company consisted wholly or mainly in making investments and whether costs of delisting were expenses of management - Dawsongroup plc v R&CC [2010] STC 1906

Expenses incurred in an abortive take-over were deductible management expenses – Camas plc v Atkinson (Insp. of Taxes) – [2004] STC 860

Interest payments by an investment company to its parent are allowable where the original debts were used for business purposes. MacNiven (HMIT) v Westmoreland Investments Ltd. [2001] STC 237

Abortive acquisition costs are not allowable as expenses of management. Hibernian Insurance Company Ltd v MacUimis. Supreme Court 20 January 2000. ITR Vol 1999-2000 page 113. CLTP 5.3.

Expenses of management not deductible for life assurance business under both Case I and I-E basis. – Johnson (HM Inspector of Taxes) v Prudential Assurance Co Ltd. [1998] STC 439

Case I - non-deductible expenditure

Whether notional management fees should be charged to subsidiaries – Belville Holdings Ltd. (in receivership and liquidation) v Cronin (Inspector of Taxes) [1993] ITR Vol 3 page 340

Meaning of investment company

Meaning of investment company – Casey (Inspector of Taxes) v The Monteagle Estate Co. [1960] ITR Vol 2 page 429 – CLTP 5.2.

Activities insufficient to characterise the company as an investment company. – Howth Estate v WJ Davis (Inspector of Taxes) [1935] ITR Vol 1 page 447 – CLTP 5.1.

Meaning of “making or holding investments”

Inheritance tax cases involving business relief. Taxpayer owned holiday letting property and transferring 85% of property to trust in two tranches and whether property was ‘relevant business property’ consisting ‘mainly…of…making or holding investments’ – Green v Revenue and Customs Commissioners [2015] SFTD 711

Irish Tax Review Articles

Investment Companies and Management Expenses. Des McDermott, Irish Tax Review, January, 1996

Obscure Cases Revisited (5). Suzanne Kelly, Irish Tax Review, May, 1998

Investment Companies, Expenses of Management and Ac300. Tom Maguire, Irish Tax Review, May, 2005

Investment Companies: “Expenses of Management” Revisited. Tom Maguire, Irish Tax Review, Issue 4, 2014

Corresponding UK Tax Provision

Section 75, Income and Corporation Taxes Act 1988. Now re-enacted at various places in the Corporation Tax Act 2009. Refer to the Destination Table of that Act for details.

Sections referred to in text

section 109 [Payments in respect of redundancy]

section 774 [Certain approved schemes: exemptions and reliefs]

Cross references

109 Payments in respect of redundancy

127 Tax treatment of restrictive covenants

144 Distributions out of profits from trading within Shannon Airport

157 Set-off of losses, etc. against franked investment income

375 Limit on renewals allowance for cars

376 Restriction of deduction in respect of running expenses of cars

420 Losses, etc. which may be surrendered by means of group relief

434 Distributions to be taken into account and meaning of “distributable income”, “investment income”, “estate income”, etc

517 Payments to trustees of approved profit sharing scheme

518 Costs of establishing profit sharing schemes

519 Employee share ownership trusts

519B Costs of establishing savings related share option schemes

531W No relief for any payment in relation to parking levy

707 Management expenses

708 Acquisition expenses

710 Profits of life business

711 Chargeable gains of life business

774 Certain approved schemes: exemptions and reliefs

840 Business entertainment

1104 Short title and construction