Disallowed costs

The trend of disallowing input tax on legal costs in defending a director as regards his actions on behalf of the relevant company continues with the Upper Tribunal’s reversal of the First Tier Tribunal’s decision in Praesto (UKUT0395). The case related to a legal challenge by a former employer of Praesto’s director, for breach of restrictive covenants. This action was made only against Praesto’s director. In substance, however, the case related to the company’s actions, and the challenger could validly have joined the company in the legal action. There was no specific reason that it did not do so. Praesto’s business would have collapsed had the director lost the case.

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