O’Donnell [2017] – Tax Deduction for third party’s legal costs

In this case the vendor was required to pay for the purchasers legal costs as part of the deal to sell a piece of land. HMRC initially disallowed the costs reimbursed by the vendor on the basis that this was not related to the transaction for the vendor. The First-tier Tribunal Applied section 38 of TCGA 1992 and decided that the vendor’s reimbursement of the purchasers legal costs facilitated the sale because it was part of the agreement reached in connection with the deal. This effectively meant that the relevant expenditure incurred by the Vendor in the end was wholly and exclusively for the purposes of facilitating the transaction and therefore allowable.

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