When expenditure is 'incurred'

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • When expenditure is 'incurred'
  • Timing of expenditure
  • Hire purchase agreements and leasing
Timing of expenditure

Capital allowances are received in the accounting period in which expenditure on plant and machinery is 'incurred'.

The normal rule is that expenditure is incurred on the date on which the obligation to pay becomes unconditional. This may be set by the contract to purchase the plant and machinery.

Where there is no contract, or the contract contains no specific agreement as to terms of payment, a person buying goods is legally required to pay for them on delivery. Therefore in most cases expenditure is incurred when the goods are delivered.

There is an exception to the general rule. If there is a gap of more than four months between:

    More on Capital allowances:
    Structures and buildings allowance
    Capital allowances ― introduction
    Incentives for investment
    Capital allowances ― property transactions and fixtures
    Plant and machinery allowances ― the annual investment allowance
    Capital allowances on cars
    Long funding leases
    First year allowances
    Special rate pool
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