NewsCase StudiesEvents

Tax deduction of costs related to the purchase or sale of a participation

Also in the news...

Import firewood into England, Scotland or Wales

Find out how to import firewood, such as logs and kindling, into England, Scotland and Wales (Great Britain).

How to check if you can delay customs payments and declarations

If you’re a business that currently buys goods from or sells goods to countries outside the UK, or are planning to trade with Europe from January 2021, HMRC’s new tool can help you identify ways you might be able to make the customs process easier for cheaper for your business. This short video shows you how to use the tool.

How can a customs intermediary or agent help me?

If you’re a UK business thinking about moving goods into or out of the UK , this video is here to help you understand how customs intermediaries or agents can help you. For more information have a look at the guidance available on gov.uk.

What are commodity codes?

If you're buying or selling goods abroad, you need to work out the amount of duty or VAT you owe. This short video tells you how to find out the ‘commodity code’ classification for your goods, using our Trade Tariff tool. Find out more on GOV.UK

What are controlled goods?

You’ll need a licence to import or export certain types of controlled goods. You may also need to pay extra duty in the UK. Unsure if this applies to your goods? This short video explains more about the types of goods that are classed as controlled. Find out more on GOV.UK

Tax deduction of costs related to the purchase or sale of a participation

Back to News

The Supreme Court recently ruled that costs related to the purchase or sale of a participation are tax deductible in case the transaction is not finalised.

Purchase costs or selling expenses incurred to acquire or sell a participation are excluded from tax deduction by means of the participation exemption (applicable when holding 5% or more of the shares in a company). The Supreme Court has defined purchase costs or sales costs as costs that would not have been incurred without that acquisition or disposal.

With external selling or purchasing costs, a clearer distinction can usually be made in this context than in the case of internal costs, the question of internal costs (for example, salaries of employees assisting with the purchase or sale in question) is to what extent these costs have been incurred solely for the purchase or sale.

Purchase costs or selling expenses only fall under the participation exemption insofar as the relevant purchase or sale has actually taken place.

The Supreme Court ruled on a situation in which a purchase or sale initially fell through, but then succeeded in a subsequent phase with another party. In such a case, it must be assessed to what extent the sales costs incurred in that first phase would also have been incurred if that phase had not taken place. Only those costs are not deductible.

It is not always possible to estimate in advance whether a purchase or sale will take place, therefore (tax) accountancy rules imply that the costs related to the planned purchase or transfer of a participation will be activated on the company’s balance sheet until it is clear whether or not the purchase or disposal goes forward.

Subsequently, it is determined to what extent the activated amounts are subject to the participation exemption (to be activated upon purchase), the remaining initially activated amount is tax deductible.


You are not logged in!

Please login or register to ask our experts a question.

Login now or register.