Investment Holding Companies

Key requirements

Direct expenses are normally deducted against the specific investment income they produce. Excess expense from one investment source generally cannot offset another source, subject to stated concessions for dividends. Statutory and regulatory costs have separate treatment; other reasonable overheads are generally guided by a 5% ceiling on gross investment income. Costs before an investment produces income and capital acquisition costs are not ordinary deductions. A passive investment holding company is not carrying on a trade for capital allowance and section 14N renovation claims, and cannot carry forward unused investment losses as trade losses. Distinguish replacement costs from initial asset purchases, and keep source-by-source income and expenditure schedules.