Business Income Manual

BIM38260 - Wholly and exclusively: companies: take-over bids: introduction: contents

S54 Corporation Tax Act 2009

Introduction and layout of guidance

In the guidance that follows the bidding company will be referred to as the 바카라 사이트™acquirer바카라 사이트™ and the company that it wishes to acquire as the 바카라 사이트˜target바카라 사이트™.

The expenses incurred by both sides in a takeover, particularly when such is contested, can be very substantial; at times running into tens of millions. Both sides may seek to deduct some or all of the costs. In the majority of cases, the bidding company바카라 사이트™s expenditure is disallowable on the grounds that it is capital. That the takeover may, in the event, be unsuccessful does not change matters. Abortive expenditure on a takeover would be capital following ECC Quarries v Watkis [1975] 51 TC 153 (see BIM35325).

During a takeover bid, costs are incurred on many different types of service. These may be bought in or undertaken by the company바카라 사이트™s own staff. These costs may be charged under a number of different heads in the accounts. The costs may include some or all of the following:

• profit forecasts put together in consultation with merchant banks and accountants, usually the company바카라 사이트™s own auditors
• merchant bankers and stockbrokers providing general advice and on such matters as researching the track record and financial soundness of the bidder/target
• legal advice will also be needed - for example, an attempt may be made to have a bid referred to the Competition Commission (formerly the Monopolies and Mergers Commission) and, in any event, regulations governing conduct during a bid are long and complex
• an advertising campaign may be launched to maintain shareholder loyalty
• public relations consultants may be retained to brief the media, major institutional investors, lobby Parliament, etc
• the costs of printing and distributing defence documents can themselves be substantial

The acquirer바카라 사이트™s costs will normally be capital expenditure, i.e. the cost of acquiring a capital asset.

The target바카라 사이트™s costs may be:

• capital (where expenditure is concerned with ownership of the shares for example), or
• revenue (where expenditure is concerned with protecting the trade or trade assets)

The guidance that follows covers:

1. BIM38265

   Companies: take-over bids: general approach
2. BIM38270

   Companies: take-over bids: nature of company incurring expenditure
3. BIM38275

   Companies: take-over bids: trading companies
4. BIM38280

   Companies: take-over bids: evidence
5. BIM38285

   Companies: take-over bids: group situations
6. BIM38290

   Companies: take-over bids: expenses recharged to trading subsidiaries
7. BIM38295

   Companies: take-over bids: other grounds for disallowance
8. BIM38297

   Companies: take-over bids: investment companies