A note for guidance on the UK Finance Act 2007 changes to the allowability of management expenses explains that these new rules are unnecessary, but nevertheless they are there.

The guidance note comments that changes made in 2004 to s75 of ICTA88 were in HMRC's view sufficient to reflect a more modern business climate in the treatment of management expenses, but that a further Targetted Anti Avoidance Rule (or TAAR) was required to act as a deterrent.

In very brief summary, the 2007 change amends the existing “unallowable purpose” rule, so that similar provisions apply to both the purpose for which investments are held and the purpose for which management expenses are incurred when determining the deductability of the management expense. The new provisions apply to expenses of management paid on or after 20 June 2007.

The full HMRC note is available at http://www.hmrc.gov.uk/ct/guidance-antiavoidance.pdf.