The Supreme Court yesterday declared that more than £400,000 (€507,895) spent by Hibernian Group plc on tax and accountancy advice was not tax deductible.

The court upheld findings by the Circuit and High Courts to the effect that the monies, spent by the company between 1986 and 1990 on evaluating the prospects of acquiring three other insurance companies then for sale, did not constitute management expenses . The Revenue had made a similar finding.

In his judgment, Mr Justice Murphy said the Circuit Court was entitled to conclude that the £404,720 spent by the group, which sum was paid to the Hibernian Insurance Company Limited (HICL), did not constitute management expenses. HICL had argued that the monies did constitute management expenses within the meaning of Section 15 of the 1976 Corporation Tax Act and as such were deductible when assessing liability for corporation tax.

The money was largely spent in obtaining advice from investment bankers and accountants, as well as legal advice, regarding the prospects of acquiring the PMPA insurance group, the Insurance Corporation of Ireland (ICI) as well as the Spanish insurance company, Vimar. None of the three companies was ultimately acquired by Hibernian.

The Inspector of Taxes ruled the advice monies were not tax deductible. Hibernian appealed that decision to the Circuit Court which found in favour of the inspector.

At the request of Hibernian, a case regarding the issue was stated by the Circuit Court judge for the opinion of the High Court. In July 1997, Ms Justice Carroll affirmed the monies could not be deemed management expenses.

Yesterday, dismissing Hibernian's appeal against the High Court finding, Mr Justice Murphy said if expenses of management constituted capital disbursements, they were not deductible when computing profits. He believed the substantial costs incurred by the group in procuring expert and specific evaluation of three investment opportunities did not constitute management expenses.

The appeal was also dismissed by the Chief Justice, Mr Justice Hamilton, and, in a separate judgment, by Mr Justice Barron.