The Court of Appeal in HMRC v Centrica Overseas Holdings Ltdhas provided the first substantive judicial treatment (with precedent value) of the disallowance for expenses of a capital nature in the management expenses regime. In finding for HMRC and disallowing all of the taxpayer’s advisory fees deduction, the judgment rejects the possibility of a management expenses-specific meaning of ‘capital nature’ and identifies a revenue/capital cliff-edge at a notably early stage in the decision-making process. Investment companies with transaction fee expenditure will now need to closely consider the case’s implications in seeking to claim management expense relief.
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The Court of Appeal in HMRC v Centrica Overseas Holdings Ltdhas provided the first substantive judicial treatment (with precedent value) of the disallowance for expenses of a capital nature in the management expenses regime. In finding for HMRC and disallowing all of the taxpayer’s advisory fees deduction, the judgment rejects the possibility of a management expenses-specific meaning of ‘capital nature’ and identifies a revenue/capital cliff-edge at a notably early stage in the decision-making process. Investment companies with transaction fee expenditure will now need to closely consider the case’s implications in seeking to claim management expense relief.
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