Legal & Professional litigation fees
I have a client who incorporated a Ltd co back in 2010 as an IT engineer. Prior to this, he was a director and employed by a company where he had set up with a friend who was also a director. In short, both client and the former company had a fall out and so he decided to go his own separate way. Due to the nature of fallouts, some customers followed my client and this began a legal case against the my client for breach of contract. My question regards the new Ltd company that has paid in excess of £10k of litigation fees to the lawyers - the case had eventually been settled out of court.
Initially the case was brought against him but then followed by the inclusion of his Ltd Co. Would HMRC regard this as allowable since both individual and his company were being taken to court OR would the costs need to be split against lawyers time per individual & Ltd Co?
Appreciate your thoughts.
Doesn't make sense
You said that the legal case was for breach of contract. Since Ltd co apparently wasn't party to the original contract, it's not possible to take a case against it for breach of the contract. I think you need to explain more clearly what the case is and why the Ltd co is involved, in order to reach an answer. But it seems to be that at least some (or even most) of the fees relate to the individual and not the new Ltd co, so it's going to be difficult to argue that it is wholly for the purposes of the trade of the Ltd co.
To the extent that the litigation fees relate to the new Ltd co protecting it's own trade, there is scope for a deduction but you don't give enough facts to help you further.