Fee fever

A client of mine disposed of shares in a limited company whereby he received a cash consideration of £1 000 000 in year 1 together with loan notes worth approximately £500 000. He subsequently cashed in these loan notes in year 2.

At the time of the disposal the taxpayer incurred legal and accountancy fees amounting to £60 000. I subsequently prepared the capital gains tax computation in respect of year 1 showing net proceeds of £940 000. HMRC have now queried that the total costs were deducted in year 1 and are insisting that only two thirds of the disposal costs should be claimed in year 1 against the consideration received and the remaining one third in year 2.

I maintain that as my client only received £940 000 in cash in year 1 this is the correct consideration which should...