Asset Disposal Expense

The taxpayer, an intermediate UK holding company for subsidiaries in various countries, incurred fees of an accounting firm, Netherlands law firm and an investment banker in connection with the difficult and extended process of effecting a share sale of, or an asset sale by, a Netherlands subsidiary (“Oxxio”). In rejecting the position of the taxpayer that such fees were incurred on income account rather than being expenses “of a capital nature” to the extent they were incurred between the “kick-off” meeting in July 2009 (shortly before such advisors were engaged) and the board meeting in February 2011 when the sale price was approved (the “Disputed Expenditures”), Lady Simler stated (at para. 87):

[T]he clear objective purpose of the Disputed Expenditure was to assist in bringing about the disposal of an identifiable capital asset, namely the Oxxio business, in whatever form that transaction ultimately took. Money expended to achieve a disposal of a capital asset is properly regarded as being of a capital nature. … The fact that there was no certainty that the Oxxio business would be sold does not make the expenditure revenue in nature. … Indeed, expenditure on an abortive capital disposal transaction is capital expenditure nonetheless and is the paradigm case of a situation in which there is uncertainty as to whether a transaction will go ahead … .