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HMRC internal manual

Business Income Manual

Specific deductions: professional fees: in-house costs

Disallow salaries etc incurred on dealing with capital matters

You should disallow in-house salary and wages costs where, for example, they are capital in character. See for instance Coltness Iron Co v Black [1881] 1 TC 287, which is discussed in BIM35401. Where the amounts involved are worthwhile you should make an appropriate disallowance of the total remuneration costs (salary, bonuses, NIC etc) of in-house professionals involved to a significant extent with, for example, the purchase and sale of the trader’s capital assets.

You should critically examine any claim for a deduction in the tax computation for any salary and associated costs that have been treated as capital expenditure in the accounts.