beta This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Business Income Manual

Specific deductions: professional fees: tax, rating & VAT appeals

You should disallow the expenses incurred directly in connection with appeals to the Tribunal or the Courts against Income Tax, Corporation Tax or Capital Gains Tax assessments. This follows from the decisions in Allen v Farquharson Bros & Co [1932] 17 TC 59 (see BIM37840) and Smith’s Potato Estates Ltd v Bolland [1948] 30 TC 267 (see BIM37850).

Community charge: Council Tax

For deductions for business rates see BIM46835 and for Council Tax see BIM46840.

The expenses of appeals against rating assessments on business premises may be allowed.


Professional fees incurred in connection with a dispute about the amount of VAT payable may be allowed as a deduction in computing profits only where either of the following applies:

  1. the point at issue is whether particular goods or services on revenue account are liable to VAT, or
  2. a trader establishes either that his VAT returns have been correct or that any incorrectness was because of arithmetical errors only.

Taxation and rating exceptional expenses

Cases not covered by BIM46450 where substantial amounts of exceptional expenditure are incurred in connection with taxation or ratings matters should be submitted to CTISA (Technical). For example, this might be the case where a deduction has been claimed for large payments which have been made to tax advisers, which substantially relate to revising or reopening computations that have already been completed by the taxpayer or his usual agents.

Indirect taxes and levies

In general you may allow expenditure incurred to obtain modifications of a trader’s own liability to indirect taxes and levies that are themselves allowable, such as betting duty (see BIM51251). However, no allowance should be made for payments of a political nature (see BIM42528).