(1)In calculating the total profits for an accounting period of a company with investment business a deduction is allowed for expenses of management of the company's investment business which are referable to that period.
(2)For the purposes of this section expenses of management are expenses of management of a company's investment business so far as—
(a)they are in respect of so much of the company's investment business as consists of making investments, and
(b)the investments concerned are not held for an unallowable purpose during the accounting period to which the expenses are referable.
(3)But—
(a)no deduction is allowed under this section for expenses of a capital nature, and
(b)no deduction is allowed under this section for expenses so far as they are otherwise deductible from total profits, or in calculating any component of total profits.
There is an exception to paragraph (a) in section 1221(1).
(4)Any apportionment needed for the purposes of subsection (2) must be made on a just and reasonable basis.
(5)The amount deductible under subsection (1) may be reduced under section 1222.
(1)For the purposes of section 1219, investments are held for an unallowable purpose during an accounting period so far as they are held during the period—
(a)for a purpose that is not a business or other commercial purpose of the company, or
(b)for the purpose of activities in respect of which the company is not within the charge to corporation tax.
(2)For the purposes of subsection (1)(a) investments are not held for a business or other commercial purpose if they are held directly or indirectly in consequence of, or otherwise in connection with, any arrangements for securing a tax advantage.
(3)In subsection (2) “arrangements for securing a tax advantage” means arrangements the main purpose, or one of the main purposes, of which is to secure—
(a)the allowance of a deduction (or increased deduction) under section 1219, or
(b)any other tax advantage.
(4)Any apportionment needed for the purposes of subsection (1) must be made on a just and reasonable basis.
(5)In this section—
(a)“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
(b)“tax advantage” has the meaning given by section 840ZA of ICTA.
(1)Section 1219(3)(a) (no deduction allowed for expenses of a capital nature) does not apply to amounts that are treated as expenses of management under—
(a)Chapter 3 (amounts treated as expenses of management),
(b)section 985(3) (share incentive plans: how relief is given),
(c)section 999(4) (deduction for costs of setting up SAYE option scheme or CSOP scheme),
(d)section 1000(3) (deduction for costs of setting up employee share ownership trust),
(e)section 1013(3) (employee share acquisitions: relief if shares acquired by employee or other person),
(f)section 1021(3) (employee share acquisitions: relief if employee or other person acquires option to obtain shares),
(g)paragraph 4(1A) of Schedule 23A to ICTA (manufactured dividends and interest), or
(h)section 196 of FA 2004 (employers' contributions to pension schemes),
or any other provision of the Corporation Tax Acts.
(2)Amounts that are treated as expenses of management under any provision listed in subsection (3) are deductible under section 1219 as if they were expenses of management of the company's investment business.
(3)The provisions are—
(a)section 999(4) (deduction for costs of setting up SAYE option scheme or CSOP scheme),
(b)section 1000(3) (deduction for costs of setting up employee share ownership trust),
(c)section 1233 (excess capital allowances),
(d)section 1235 (employees seconded to charities and educational establishments),
(e)section 1236 (payroll deduction schemes),
(f)section 1237 (counselling and other outplacement services),
(g)section 1238 (retraining courses),
(h)section 1239 (redundancy payments and approved contractual payments),
(i)section 1242 (additional payments),
(j)section 1245 (payments to Export Credits Guarantee Department).
(1)This section applies to a UK resident company if—
(a)income arises to the company from a source not charged to tax,
(b)the company has the source in the course of carrying on its investment business, and
(c)the income is not franked investment income.
(2)This section applies to a non-UK resident company if—
(a)income arises to the company from a source not charged to tax,
(b)the company has the source in the course of carrying on its investment business through a permanent establishment in the United Kingdom,
(c)the source is property or rights used by, or held by or for, that establishment, and
(d)the income is not franked investment income.
(3)The amount of that income is deducted from the amount (if any) that would otherwise be deductible under section 1219 for the accounting period in which the income arises.
(1)This section applies if, in an accounting period of a company with investment business, any amount falling within subsection (2) cannot be deducted in full because the profits from which the amount is deductible are insufficient.
(2)The amounts are—
(a)expenses of management deductible under section 1219,
(b)charges on income paid in the accounting period, so far as they are paid for the purposes of the company's investment business, and
(c)amounts brought forward to the period under this section.
(3)The excess is treated for the purposes of section 1219 as expenses of management deductible for the next accounting period.
(4)For the purposes of this section a charge on income which arises from a disposal such as is mentioned in section 587B(1) of ICTA (gifts of shares, securities and real property to charities etc) is taken to be paid when the disposal is made.
(5)See also section 392A(3) of ICTA (which is about unused Schedule A losses).