BIM46435 - Specific deductions: professional fees: capital structure of business

Expenditure is capital

Fees incurred in connection with the acquisition, alteration, enhancement or defence of the fundamental structure of a business are generally capital, for instance the cost of:

• forming, renewing, varying or dissolving a partnership,
• negotiating a merger between companies or partnerships,
• forming and registering a company, or changing a company's status, for example, from limited to unlimited status or to a PLC,
• defending against a petition by shareholders to wind up a company,

you should critically examine claims that significant amounts of fees incurred on the structure or status of a company are revenue in character.

As well as being revenue in character the fees also have to satisfy ICTA88/S74 (1)(a) see BIM42101 - BIM42105. In particular, fees connected with the capital structure of a partnership are invariably excluded by ICTA88/S74 (1)(a) see C Connelly & Co v Wilbey [1992] 65TC208 (see BIM35525) and MacKinlay v Arthur Young McLelland Moores & Co [1989] 62TC704, see BIM38120.

Share register and valuations required by Companies Act 1985

For expenses incurred by companies on keeping share registers, printing annual accounts, holding shareholders' annual general meetings, Stock Exchange quotations etc. see BIM42510. For valuations made for the purposes of Companies Act 1985 Schedule 7 paragraph 1 (1) see BIM42540.