Commentary on Sections Overview Chapter 4: Rules restricting deductions Section 1247: Introduction
3150.This section introduces the Chapter. It is new.
3151.Subsection (2) lists rules outside this Part that affect the calculation of management expenses. All these rules in the source legislation are drafted in wide terms (for instance, “for the purpose of calculating profits or other income charged to corporation tax”). The rules apply to the calculation of management expenses because that is part of the calculation of profits charged to corporation tax.
3152.In some cases the application of the rewritten rules is restricted so that they do not apply in calculating the profits of a trade or property business. That is because there is an equivalent rule in Part 3 (trading income) which is also applied to property income by section 210.
3153.The permissive rules for management expenses in Chapter 3 of this Part say that expenses are “treated for the purposes of Chapter 2 as expenses of management”. The restrictive rules in this Chapter “restrict the deduction of expenses of management under section 1219” (which is in Chapter 2). So it is clear that the restrictive rules have priority.
3154.This is the reverse of the position for trading income, where the general rule in section 51 is that the permissive rules have priority. But, in the unusual cases where it is possible for the rules to overlap, the result is the same.
3155.Subsection (3) draws attention to section 196A of FA 2004. This rule about pension scheme contributions does not itself restrict management expenses. But it gives HMRC power to make regulations that may make such a restriction.