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HMRC internal manual

Business Income Manual

Specific deductions: professional fees: general principles

Professional fees are not allowable if they are:

  • capital (see BIM35000 onwards), or
  • excluded by statute (e.g. they are not incurred wholly and exclusively for the purposes of the trade, see BIM37000 onwards, or they are losses which are not connected with/arising out of the trade, see BIM46445).

Except where the matter is clear-cut, the circumstances surrounding the payment and the precise nature of the professional services provided need to be examined to consider the nature and underlying purpose of the expenditure when it is incurred. It is immaterial that the expenditure may subsequently prove to be abortive, see Pyrah v Annis and Co Ltd [1956] 37 TC 163 and ECC Quarries v Watkis [1975] 51 TC 153. The latter case is discussed in BIM35325.