Design Consultancy Fees For Office Allowed for CT?

Fees re office design consultancy re existing leasehold office & possible new office - CT allowable?

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Cleint has incurred significant professional fees which are described in the ledger as "design development", further clarified as "office design consultancy relating to existing (leasehold) office and possible new office.

As far as I am aware, no building work has been subsequently undertaken based on these designs.

For that reason, client is of the belief that these professional fees should be regarded as revenue expenditure in the P&L and are allowable as a revenue deduction for corporation tax purposes.

My opinion is that fees which are connected with the (possible) modification of a capital asset (ie office premises) are capex and so should be disallowed in the corporation tax computation.

Furthermore, the fact that this expenditure may subsequently prove to be abortive, is immaterial - they are still disallowable, whether any work is carried out or not.

Are there any circumstances where such design consultancy fees relating to office premises could be considered alllowable for CT purposes?

Similarly, I believe other legal fees incurred re acquistion of a property which did not go ahead, should also be disallowed for CT purposes. Correct?

Thank you!

 

Replies (5)

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By Ruddles
23rd Jan 2017 16:30

The test is simple - how would the expenditure have been treated had the project(s) gone ahead? Abortive costs are then treated in exactly the same manner.

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Replying to Ruddles:
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By webs123456
23rd Jan 2017 21:53

My view is that they should be capitalised as they relate to a capital asset ie office premises.
I can't see how they could be allowable for corporation tax purposes as they are not fees which have been incurred in connection with the company's trade.
Anyone disagree?
Thank you!

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Replying to webs123456:
By Ruddles
23rd Jan 2017 22:03

You're answering your own question (and only you can do so). Although you're asking the wrong question. It's not whether it's for the purposes of the trade, it's whether it's capital or revenue. I could hazard a guess but you're the one with access to the relevant info.

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By webs123456
23rd Jan 2017 22:43

I suppose I am!
Based on the clients explanation that these consultancy fees were in respect of office design consultancy relating to his existing (leasehold) office and possible new office, I believe them to be capital in nature and so should be added back in the CT comp as disallowable.
Was wondering if anyone could see any reason for treating them any differently, ie as revenue expenditure?

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Replying to webs123456:
By Ruddles
23rd Jan 2017 22:59

You're not getting it. 'Relating to the office' means nothing. The expenditure is either capital or revenue, based on normal principles. Unless you can provide a full description of the nature of the works I doubt that anyone here would find any reason to challenge your treatment (or confirm it.)

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