Are legal fees tax deductible for self-employed sole traders in the UK?

It depends on the nature of the legal fees. HMRC draws a distinction between revenue (ongoing) legal costs and capital (one-off, asset-related) legal costs. Allowable legal fees include: debt collection from customers, defending your business's trading rights, employment disputes involving staff, contract reviews for regular business agreements, and professional legal subscriptions. Not allowable: legal fees for acquiring a capital asset (e.g. buying a property or a business), setting up the business itself, or personal legal matters. Fees for drawing up contracts that are part of normal trading (e.g. client service agreements) are allowable. But fees for negotiating a long lease or purchasing a business premises go onto the capital account. Claim allowable legal costs under 'Accountancy, legal and other professional fees' on SA103.

  • Revenue legal costs (debt collection, contracts, employment) are fully deductible
  • Capital legal costs (buying property, business acquisition) are NOT deductible in the same way
  • Client contract reviews and service agreement drafting: allowable
  • Setting-up costs and capital transactions: not allowable as revenue expenses
  • Keep detailed invoices showing what the legal work related to

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