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Where Taxpayers and Advisers Meet

Incidental costs of disposal

Brightonian
Posts: 99
Joined: Wed Aug 06, 2008 3:31 pm

Postby Brightonian » Wed Jan 17, 2007 10:01 am

I can find little guidance on the incidental costs of disposal where someone sells their company. Legal and accountancy bills can be huge - is all the professional advice allowable? After all, the advice would not be sought if there were no sale. In the situation I am thinking of, it is a sale of shares, not assets.Does anyone have a view?

JAB
Posts: 123
Joined: Wed Aug 06, 2008 3:29 pm

Postby JAB » Wed Jan 17, 2007 10:42 am

http://www.opsi.gov.uk/acts/acts1992/Uk ... htm#mdiv38

You want to look at s38 TCGA 1992 in the link above as follows.

"(2) For the purposes of this section and for the purposes of all other provisions of this Act, the incidental costs to the person making the disposal of the acquisition of the asset or of its disposal shall consist of expenditure wholly and exclusively incurred by him for the purposes of the acquisition or, as the case may be, the disposal, being fees, commission or remuneration paid for the professional services of any surveyor or valuer, or auctioneer, or accountant, or agent or legal adviser and costs of transfer or conveyance (including stamp duty) together—
(a) in the case of the acquisition of an asset, with costs of advertising to find a seller, and
(b) in the case of a disposal, with costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation of the gain, including in particular expenses reasonably incurred in ascertaining market value where required by this Act."

And HMRC website here:

http://www.hmrc.gov.uk/manuals/CG1manual/cg15252.htm

Brightonian
Posts: 99
Joined: Wed Aug 06, 2008 3:31 pm

Postby Brightonian » Thu Jan 18, 2007 2:02 am

Perhaps I should have gone into a little more detail. I am familiar with the legislation but have come across little that helps interpret the legislation. If someone seels their company , I assume that the legal, accountancy etc fees incurred in negotiating the deal, including seeking S.707 ICTA and S138 TCGA clearances is acceptable. Presumably this would be apportioned between cash, loan notes, newco shares etc. I am just a little nervous that HMRC will balk at 'incidental' costs that run into hundreds of thousands of pounds!


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