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HMRC internal manual

Business Income Manual

Capital/revenue divide: intangible assets: cost of an anti-nationalisation campaign

The courts decided in Southern v Borax Consolidated Ltd [1940] 23TC597 (see BIM35540) that the cost of preserving a taxpayer’s title to an asset was allowable. An extension of this is to allow the costs of defending title to all of the taxpayer’s assets.

Morgan v Tate & Lyle Ltd [1954] 35TC367 was concerned with the expenses of an anti nationalisation campaign. The company incurred expenses on a campaign designed to show that nationalisation of the sugar refining industry would be harmful to workers, consumers and stockholders alike. The Commissioners found that the company’s primary purpose was to prevent the loss of its business and to preserve its assets intact. There was considerable difference of judicial opinion. The majority view was that just as the expense of Borax Consolidated defending the ownership of one asset was allowable so must the expense of Tate & Lyle defending the ownership of all the assets of its trade. There was no question of the acquisition or improvement of any capital asset.