»Ê¹ÚÌåÓýapp

You should critically examine any claim that significant amounts of fees incurred on the structure or status of a company are revenue in character. Fees incurred in connection with the acquisition, alteration, enhancement or defence of the fundamental structure of a business are generally capital. You should disallow as capital expenditure the costs of the following:

1. Forming, renewing, varying or dissolving a partnership.
2. Negotiating a merger between companies or partnerships.
3. Forming and registering a company, or changing a company’s status (for example, from limited to unlimited or to a PLC).
4. Defending against a petition by shareholders to wind up a company.

You should bear in mind that where any such fees are revenue in character they also have to satisfy the ‘wholly and exclusively� requirement in S34(1)(a) Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005) or S54(1)(a) Corporation Tax Act 2009 - see BIM37000 onwards.

S34(1)(a) ITTOIA 2005 invariably excludes fees in connection with the capital structure of a partnership. In the case of C Connelly & Co v Wilbey [1992] 65TC208 an accountancy partnership was dissolved. »Ê¹ÚÌåÓýapp Commissioners and the courts dismissed the partnersâ€� claim that the costs of dissolving the practice be allowed. »Ê¹ÚÌåÓýapp legal expenses had not been expended wholly and exclusively for the purposes of the partnership trade, but had been incurred to protect one partner’s interests. See also BIM35545.