In theory, there is a distinction between expense incurred in drawing up accounts for business reasons, and in drawing up accounts for tax purposes: the former is incurred in the course of business but the latter is not (Smith’s Potato Estates Ltd v Bolland (1948) 30 TC 267, especially per Lord Porter at p. 520). However, the two are so closely linked that it would be a difficult and artificial process to identify expenditure attributable to one or other purpose, and in practice HMRC allow the deduction of expenses incurred in preparation of accounts for tax purposes, and agreeing the computation with the tax officer.

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