Chapter BIM38260
Published date | 22 November 2013 |
Record Number | BIM38260 |
In the guidance that follows the bidding company will be referred to as the ’acquirer’ and the company that it wishes to acquire as the ‘target’.
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 company’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 company’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 company’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 -...
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