Are Legal Costs Tax Deductible?

Starting and running a business can mean you incur all sorts of legal costs, from drawing up contracts to hiring a surveyor. The good news is that lots of the legal costs you’re likely to have during the course of business are allowable expenses, so you can deduct them from your profits to claim the amount back against your tax bill.

What legal expenses can I claim tax relief on?

You can claim tax relief on most legal expenses as long as they are ‘wholly and exclusively’ for the business, and directly relate to it. If an expense is for both business and private use, you can only claim for the business portion of it on your tax return.

Sadly you won’t be able to claim relief on legal costs arising from a dispute with HMRC, and this includes any fines or penalties you receive!

How do I claim legal fees for my business?

Businesses pay tax on the amount of profit that they make, so deducting allowable expenses from your total income means there’s less profit, and therefore less tax to pay. When you submit a tax return for your business you’ll be able to tell HMRC about the total amount of income it received, as well as the amount of expenses you’re claiming, and they’ll work out the profit figure you need to pay tax on.

Can I claim capital allowances on legal costs?

If you have legal costs which result from buying property or equipment then these are considered to be part of the asset’s purchase price. This means that rather than claiming the expense as a one off, you can claim capital allowances over the lifetime of the asset being in your business.

Claiming expenses can be complex. Our teams of accountants can help! Talk to an advisor to get started by calling 020 3355 4047, or get an instant online quote.