Annex 1: Minor Changes in the Law Change 81: Expenses of management: section 1221
This change clarifies the relationship between:
	the rules in section 75(4) of ICTA that an expense must be in respect of the company’s investment business and not for an unallowable purpose; and
	other rules that expenses are to be treated as expenses of management.
In the case of expenses that are to be treated as expenses of management, there is a distinction between:
	rules that simply treat expenditure as an expense of management; and
	rules that go to on to say that expenditure is, as a result, deductible under section 75.
The rules in the first category leave the expenditure to meet the tests in section 75(4) of ICTA. Section 1221 of this Act preserves this position for rules such as that in section 1244 of this Act (rewriting section 79 of ICTA).
The rules in the second category apparently override the rules in section 75(4) of ICTA. Section 1221(2) and (3) of this Act make this clear.
This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with generally accepted practice.