HMRC’s internal manual offer some revealing insights as to the treatment of accountancy expenses arising out of an enquiry. As a matter of course, HMRC allows companies to claim a tax deduction for normal accountancy expenses incurred in preparing accounts or accounts information and in assisting with preparing Self-Assessment tax returns.
In respect of accountancy expenses arising out of an enquiry HMRC’s manuals state the following:
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:
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:
the additional accountancy expenses will be allowable.
This guidance was originally published in Tax Bulletin 37 (October 1998) and supersedes Statement of Practice SP16/91 which applied to pre-SA periods.
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