There are a number of different legal and professional fees that are allowable for tax and some that are not, which means it can get quite confusing as to what can be claimed.
If you have fees that are related to capital (a long term expense) or non-trading (one off expense) items, including fees gained when obtaining new capital assets, or creating partnership agreements for example, these are not allowed.
There are, however, some fees relating to capital expenses that are allowed. These exceptions include the cost of registering trademarks or patents, the incidental costs, such as legal fees, connected with obtaining loan finance by a business that isn’t a limited company, and the legal fees related to renewing a short lease, which is defined as 50 years or less.
If you have incurred legal fees on tax matters, these also aren’t allowed to be claimed for tax. The reason for this is because if you appeal against a tax assessment, it may not just be for the intentions of the business.
HMRC do allow for normal accountancy fees to be claimed, including preparing of accounts etc. Also, other accountancy costs that are produced from a HMRC investigation are allowed, as long as they don’t create other fees such as extra tax or penalties.
Fees that are directly linked to trading are allowed, and these include: • Trade debt collection fees, • Costs created from ending an onerous trading contract • Associated fees of actions for a contract breach or the costs of a successful defence of a contract breach, • Costs of defending a taxpayer’s title for fixed assets.
What is or is not allowed to be claimed for tax can be difficult to understand, but simply, if it is a fee relating to capital or non-trading items, it is usually not allowable for tax. However, if it is a fee directly related to trading, then you are usually allowed to claim back the tax.