Management expenses and Centrica: problems for the present?

The Court of Appeal in HMRC v Centrica Overseas Holdings Ltd has 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.