My client recently set up a French registered company to expand her trading activities into France.
She has incurred around £3k of costs, including solicitor fees and incorporation fees. The French entity has not received any income and won’t be in the near future.
Can these costs be allowed against her UK tax calculation?
The general position is that legal and professional fees are deductible for corporation tax purposes where they are revenue in nature and incurred wholly and exclusively for the purposes of the company’s trade/business activities. However, costs which are capital in nature are generally not deductible.
HMRC guidance at BIM46435 and related manuals broadly distinguishes between:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46435
Based on the facts provided, our view would be that both the incorporation fees and legal fees relating to the creation/establishment of the French entity would be regarded as capital, not revenue costs and therefore not deductible, on the basis that the expenditure appears to relate to the establishment of a new corporate structure overseas rather than the ongoing trading activities of the UK company itself/ sole trader.
A client owns 100% of the shares in their trading company and is considering gifting 20% of the shares to their adult daughter, who has recently started working in the business. Will there be any immediate tax consequences?
A gift of shares to a connected person is treated as taking place at market value for Capital Gains Tax purposes, regardless of whether any consideration is paid. Therefore, the shareholder could be treated as making a disposal at market value and may realise a chargeable gain.
However, if the company is a trading company (or the holding company of a trading group), hold-over relief under s165 TCGA 1992 may be available. This allows the gain to be deferred by transferring it to the recipient, meaning no immediate Capital Gains Tax liability arises for the donor.
The recipient effectively inherits the deferred gain, which will crystallise when they eventually dispose of the shares. It is important that a joint election for hold-over relief is made within the relevant time limits.
A client has made significant pension contributions during the 2025/26 tax year and is concerned about exceeding the annual allowance. Can unused allowances from earlier years be utilised?
Yes. Where an individual has been a member of a registered pension scheme, unused annual allowance from the three previous tax years can generally be carried forward and used in the current tax year.
The current year's annual allowance must be utilised first before any brought-forward allowances are accessed. The oldest available unused allowance is then used before more recent years.
When calculating available relief, it is important to consider whether the client is subject to the tapered annual allowance. High-income individuals may have their annual allowance reduced depending on their adjusted income and threshold income figures.
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