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Sam
Sam, Accountant
Category: Tax
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Question on what legal expenses are deductible

Resolved Question:

Hi
Question on what legal expenses are deductible for UK corporation tax purposes:
a) legal advice relating to regulation of industry company in
b) legal advice on shareholder agreement of company
c) legal advice on shareholder agreement of a 75% subsidiary of company
d) legal completion of shareholder agreement for b) and c)
d) legal advice on changing company structure
e) legal fees paid on behalf of a 100% subsidiary
Thanks
James
Submitted: 2 years ago.
Category: Tax
Expert:  Sam replied 2 years ago.
Hi James
Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer.
They seem to be all allowable but not against the one company (and one of them seems to be a personal cost so may not be permitted as a company cost as incurred by the potential/existing shareholder)
But all legal and taxation advise, and support, and services rendered are an allowable expense against the business - if incurred for the business.
Just in this case more than one business seems to be involved! And possible a personal cost for a shareholder.
If you could expand further I could provide a more detailed response
Thanks
Sam
Customer: replied 2 years ago.

Hi Sam

sorry, I'm slightly confused. could you just say which ones might not allowable and which ones are okay by the letters I've used and then I will expand?

Thanks

James

Expert:  Sam replied 2 years ago.
Hi James
I cannot advise for certain until I know how each cost arose - and whether all by the same business - as it would seem you have at least two businesses that are connected and shareholder (individual rather than business) costs - and to establish correctly whether the cost is allowable and whether against the UK corporation tax purposes
If you wish me just to provide a generic answer then at face value then just a and d
Please provide the information requested so I can assist further
Thanks
Sam
Customer: replied 2 years ago.

Hi Sam

okay thanks I've deleted a and d, see below.

b) legal advice on shareholder agreement of company

during company set up there was 2 s/h and 2 directors (me being one of each)and it was felt a shareholder agreement was needed so legal advice was obtained to gain agreement on some unique matters of the company, and then complete the documentation although the document in the end was never actually signed.

c) legal advice on shareholder agreement of a 75% subsidiary of company

A subsidiary company was set up with another person. (75% owned by my company, 25% by other party). Legal advice was needed on the shareholder agreement and then to complete the necessary documentation but again it was never actually signed. These fees were all paid by my company.

e) legal fees paid on behalf of a subsidiary

random legal fees in relation to they're business, i.e on regulation, client issues, etc. pretty sure this is not allowed.

Thanks

James

Expert:  Sam replied 2 years ago.
Hi James
Thanks for your response and the additional information
Then b would also be allowable as drawn up by the company, and is irrelevant whether ever signed - the fact that a cost was incurred seeking the appropriate advise and legal stance makes it an allowable cost against the limited company
for c this would apply to the subsidiary company as the cost was relevant to them - so not allowable from your originating business (so not allowable for the main company)
e - you are spot on this is not allowable for the main company - as a cost that should have been incurred by the subsidiary
You could charge c and e to the subsidiary company (bring in additional income to the main company to cover those costs - thereby negating the loss of charges) and the subsidiary company could then claim them as expenses against their profit position.
I hope that helps, let me know if you require any further assistance with this matter - but it would be very much appreciated if you could rate (or click accept) to reflect the level of service I have provided, and this then ensures that Just Answer credit me for my time.
Thanks - and have a lovely weekend
Sam
Customer: replied 2 years ago.

thanks

I have some more questions will be back later today!

Expert:  Sam replied 2 years ago.
Hi
Thanks - then if you take the trouble to rate me for this question - and then any further questions should be listed as a new post. And if you would rather wait for me (out to see clients later today) then just advise any expert that might pick up the questions in the meantime
Thanks
Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13810
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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