Trade or investment?

Dawsongroup Ltd was the parent company of a group of companies. It went public in 1988 and 25% of its shares were floated on the London Stock Exchange.

In the build-up to the flotation it reorganised the group so that the subsidiaries owned properties from which the group carried on its business.

The parent company held shares in the subsidiaries and undertook various administration functions including finance banking information technology and company secretarial services.

In 2000 the company delisted the shares and incurred expenditure of £433 574. It sought to deduct the amount as a management expense in computing its profits on the basis that it was an investment company under TA 1988 s 130.

HMRC did not allow the deduction on the ground that the appellant’s business was the provision of head office functions and strategic management.