Management expenses

The taxpayer business was the parent of the MFI group of companies which was sold to Mayflower Ltd.

The taxpayer had supplied parent guarantees to MFI in respect of its rental obligations to enable it to take prime retail sites. The arrangement remained in place after the sale.

Mayflower went into administration in November 2008. The taxpayer was called on to make payments under the guarantees: rental guarantee payments of about £3.5m and release payments of about £5.7m.

The business claimed the related management expenses in its accounts as a tax deduction under TA 1988 s 75. HMRC refused the claim.

The First-tier Tribunal said the rental guarantee payments replicated quarterly rental payments and ought to be treated as revenue payments because they related to assets that did not belong to the taxpayer and did not support its investment business. They did not qualify under s 75.