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HMRC internal manual

Enquiry Manual

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HM Revenue & Customs
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Concluding an Enquiry: Accountancy Expenses Arising out of Enquiries

It is the practice to allow, in computing profits assessable under Part 2 Chapter 4 of ITTOIA 2005 and under Case I & II Schedule D for companies, the normal accountancy expenses incurred in preparing accounts or accounts information and in assisting with the self assessment of tax liabilities.

Additional accountancy expenses arising out of an enquiry into the accounts information in a particular year’s return will not be allowed where the enquiry reveals discrepancies and additional liabilities for the year of enquiry, or any earlier year, which arise as a result of

  • negligent or fraudulent conduct or
  • for periods beginning on or after 1 April 2008 where the filing date for the return is on or after 1 April 2009, careless or deliberate behaviour.

Where, however, the enquiry results in no addition to profits, or an adjustment to the profits for the year of enquiry only and that adjustment does not arise as a result of

  • negligent or fraudulent conduct or
  • for periods beginning on or after 1 April 2008 where the filing date for the return is on or after 1 April 2009, careless or deliberate behaviour

the additional accountancy expenses will be allowable.

The above guidance was published in Tax Bulletin 37 (October 1998) and supersedes Statement of Practice SP16/91 which applied to pre SA periods.

This statement says nothing about the period for which the additional expenses will be allowed. With a continuing business, normal practice is to allow the expenses as a deduction in computing the profits of the accounting period in which they were incurred. However, with a business which has ceased, operating a similar practice might well mean that these expenses would be stranded with no income or profits to set them against. In such cases, the additional expenses can be allowed in the final accounts up to cessation.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)