BIM46415 - Specific deductions: professional fees: tangible and intangible capital assets
Capital expenditure, outwith the intangibles regime, is not allowable
The corporate intangibles rules apply to companies holding
intangible assets which they created or acquired from an unrelated
party after 31 March 2002 (see
BIM35501). The guidance that follows on
this page applies only to expenditure that is not within the
corporate intangibles rules.
Where incurred on the maintenance of existing assets, trade
rights or facilities (whether real or perceived) even if the
assets, rights etc are of a capital nature, fees are revenue
expenses. See Southern v Borax Consolidated Ltd [1940] 23TC597 (
BIM35540) and Cooper v Rhymney Breweries
Ltd [1969] 42TC509. The admissibility of fees incurred to try to
maintain alleged trade rights etc does not depend upon the outcome
- they are allowable even where the attempt fails.
Fees are capital expenses when incurred on the acquisition,
improvement or elimination of an identifiable capital asset of a
business, such as premises or plant. See for example Granada
Motorway Services [1979] 53TC92,
BIM35320.
Fees incurred on the acquisition, improvement or elimination
of an intangible right or facility of a capital nature are capital
expenses. See Moore and Co v Hare [1914] 6TC572, Pendleton v
Mitchells & Butler Ltd [1968] 45TC341.
Examples of assets, rights and facilities of a capital nature
are:
- Shares in another company - see BIM46460 concerning the expenses that may be incurred by both sides in takeover negotiations in addition to normal transfer costs.
- Investments and loans to other traders which it is not part of the trade to make licences governing the use of the trader's fixed assets or licences which are capital in their own right, for example a public house licence, but see BIM61405, or a franchise agreement, see BIM57600 onwards.
- Leases of plant and machinery used as the trader's fixed assets.
- Leases of business premises.
As well as being revenue in character the fees must also satisfy ICTA88/S74 (1)(a) see BIM42101 - BIM42105 before they may be deducted.
