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Management Expenses (Investment Company)

Posted on: Thursday, October 01, 2015

Over the years, I've noticed that CAP 2 students seem to focus on the larger areas of their tax syllabus such as Tax Adjusted Profit Computations, Retirement Relief, Business Property Relief, etc. but don't take account of the other examinable areas such as Management Expenses for Investment Companies.  In an exam there are valuable marks allocated for these often ignored sections.

If you see part of a question examining "management expenses for an investment company" what are you being asked?

Invariably you will be expected to know what constitutes "Allowable Management Expenses."

Allowable Management Expenses include the following:

  1. Day- to-day running expenses such as interest on loans, audit fees, etc.
  2. Directors fees but which are subject to certain limits - either 10% or 15%.
  3. Lump sums paid under the RPA or employer's contribution to approved pension.
  4. Stockbroker's fees but this does not include fees spent on new investments as these would be deemed to be capital.

Other points to remember:

Qualifying donations to charities and approved sports bodies are to be reduced by an income which is not subject to tax, other than Franked Investment Income.

Finally, you should not include expenses which are deductible in computing Schedule D case V profits.



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