BTC - June 2007 Legal Fees

timgriff

Hi friends,

Hope your all enjoying your tax revision as much as I am

Just noticed on the June 2007 paper, section 2.1, "Legal Fees in relation to a tax appeal" is added back.....

I take it this is because it fails the 'wholly and exclusively for the purpose of trade' test?? It's a bit ambiguous don't you think seeing as the tax relates to profits paid on trade?

So many grey areas, hope these don't appear on Tuesday

EAP

ouch! I'm gonna fail!

I would definitely have said it was allowable, so I looked it up. It seems something similar to this has been argued in the court of appeal so I don't really think it was a fair one to put in. See link below:
http://www.hmrc.gov.uk/manuals/bimmanual/bim37850.htm
As i understand it, the premise is that the appeal was to see how much tax they needed to pay so had nothing to do with actually earning profits but with how they were distributed (i.e. how much the tax man got)
hopefully, they'll play nice this year!

timgriff

Thanks, glad to see it wasn't just me! Interesting to read what the chief examiner had to say:

"Task 2.3
The good news is that the layout used by the majority of students was sound, and their approach to the answer was competent. However, there were three recurring errors.
The first one was the failure to add back the legal fees in relation to the tax appeal – no professional charges incurred in connection with a tax appeal, whether successful or not, can be allowed."

EAP

now I'm almost hoping it does appear in this year's paper - at least the two of us should get it right!

Beth

Wholly and exclusively for trade purposes can get a bit messy! Fingers crossed there aren't too many head scratchers in the exams!

mrspnut

You can't claim for the costs of trying to get money back off HMRC - that's why it's disallowed.