Management expenses were not those of the investment company

COHL was an investment holding company in the Centrica group. It had a Dutch subsidiary Oxxio. In 2009 Centrica decided to sell Oxxio and its subsidiaries although ultimately it achieved only a part sale in 2011 by means of a partial demerger to E. Centrica incurred fees of £3.8m during the period 2009 to 2011 paid to three firms for services relating to the transaction. The expenditure was recharged to COHL which claimed £2.5m as management expenses deductible from its profits.

HMRC refused the claim. This was on basis the expenses did not belong to COHL’s investment business rather they related to the implementation of a decision already taken by a different company and carried out by Oxxio.

The First-tier Tribunal agreed with HMRC. Realistically Centrica made all of the decisions. The various group teams did not think of themselves as providing services to COHL but as...