Building Blocks of Tax - Elizabeth Small writes for Taxation

In an article for Taxation Magazine, Corporate Tax Partner, Elizabeth Small considers the recent Supreme Court decision in Centrica Overseas Holdings Ltd v HMRC [2024] UKSC 25.

Centrica (the company which owns British Gas) argued that the fees charged by its professional advisors on the sale of one of its assets was a management expense and should be deemed to be a revenue expense and therefore deductible from their corporation tax bill. The Supreme Court unanimously dismissed Centrica’s appeal and held that the expenditure was capital in nature and could not be deducted.

In the article, Elizabeth looks at the facts of the case and discusses why being able to differentiate between capital and revenue expenditure is a fundamental part of the UK tax and in this case, a holding investment company’s ability to deduct deal fees. With reference to the Supreme Court judgement the article considers the three legal tests which help determine whether something is revenue or capital in nature and sets out the principles which the court applied to reach its decision, and how early in the process the advisory fees may become costs of disposal.

Read the full article here.