Defending its reputation

S was the sole shareholder and director of the taxpayer consultancy business Key IP.

In 2004 Key IP became involved with another company A of which P was the chief executive officer and M the chairman.

In 2008 S emailed various recipients saying M should leave the board. P then wrote to the shareholders in A saying he was aware of the call for P to resign and suggestions of a rift between the directors of A and M were untrue.

S believed the letter to be defamatory and sued A and P for libel. The case resulted in legal costs of nearly £460 000 which Key IP claimed as a deduction in its company tax return under TA 1988 s 74(1)(A).

HMRC disallowed half the claim; the company appealed.

The First-tier Tribunal found...