Can you get tax deduction for legal fees on sale of debtors

Can you get tax deduction for legal fees on...

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We have a client that is selling the business.

The assets being sold are work in progress and debtors. There is no good will as trade is poor

Is there any way they can obtain tax relief on the legal fees, if so how

Replies (8)

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By petersaxton
09th Dec 2013 00:18

Capital gain?

Isn't it an allowable deduction against capital gains?

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By eastangliantaxadvisor
09th Dec 2013 00:23

but there is no capital gain

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By petersaxton
09th Dec 2013 00:50

No capital gain

Then there's a capital loss after legal fees.

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By johngroganjga
09th Dec 2013 08:08

Agree that it is capital.

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By Steve Kesby
09th Dec 2013 09:27

Er...

... are they trade debts? if so I'd say that you had a trading profit or loss in which the legal fees should feature as a deduction.

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Replying to roseorgan.fsbdial:
By eastangliantaxadvisor
09th Dec 2013 10:24

That's the point I was getting at.

 

The deal is that the ther party is purchasing the trade and business of the partnership, and that the assets being purchased are the trade debts and work in progress. A small amount is being paid for goodwill,.

 

Therefore, I was thinking that the legal fees would need to be split on a reasonable basis, and the element relating to the debts allowable for tax.

 

Mark

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By petersaxton
09th Dec 2013 10:47

Contradiction

You say: "There is no good will as trade is poor" and then you say "A small amount is being paid for goodwill,."

You also say: "The deal is that the ther party is purchasing the trade and business of the partnership, and that the assets being purchased are the trade debts and work in progress. A small amount is being paid for goodwill,."

Clearly this is a capital transaction and not trading.

 

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By Steve Kesby
09th Dec 2013 14:04

Yes...

... I agree with Peter on the retelling of it.

I'd understood that you were just selling the assets.

If you sell the whole business the individual values ascribed to stock/wip/debtors will impact your trading result to cessation, but the costs of selling the business as a whole are capital in nature.

Whilst you initially said there is no goodwill and then that a small amount was being paid for it, you don't mean there isn't any goodwill, you mean that it's not considered to have any great value.

I can't see a basis for apportioning legal fees to the trading items, because it's a sale of a going concern, rather than individual assets.

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