Starting a business can incur a number of legal costs, such as drawing up a lease, using agents, or paying surveyor fees. You can deduct some legal fees from your profits to claim them back, while others as capital allowances.

Expenses and mixed usage

Most expenses are deductible as long as they are ‘wholly and exclusively’ for the business. If an expense is for both business and private use, you can only claim for the business portion.
 

Capital allowances

The legal costs of buying property or equipment are part of the asset’s purchase price, so you should treat these as capital allowances.
This means you can reclaim capital allowances over the lifetime of the asset.

What legal costs are allowable?

Legal costs for any disputes with HMRC are not deductible, and this includes any fines or penalties you receive. You may be able to deduct legal fees as a necessary business expense if it directly relates to the operation of the business.

Fees you incur for the preparation and submission of company accounts are deductible, because they’re necessary for the business. You can’t deduct legal fees which you incur when drawing up a new lease though, because they refer to the capital of a 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 tailored quote online.

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About The Author

Lee Murphy

MAAT and ICPA accountant, with a passion for making accountancy and bookkeeping accessible. Other interests include cloud-based software development for web and mobile access, keeping fit, reading, and entrepreneurship.

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