Capital vs revenue expenditure

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance

Capital vs revenue expenditure

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
imgtext

Expenditure of a capital nature is not allowed as a deduction when calculating trading profits. Expenditure of a revenue nature is allowable provided there is no specific statutory rule prohibiting a deduction and the expenditure also satisfies the wholly and exclusively test. See the Wholly and exclusively guidance note.

The distinction between capital and revenue can be incredibly difficult to make. In some cases it will be impossible to categorically determine whether expenditure is an allowable deduction.

Sometimes it may be pragmatic to avoid drawing a distinction where any capital element would qualify for immediate full relief under the annual investment allowance or a 100% first-year allowance. In that case, the immediate tax relief may be the same. However, the classification can still affect eligibility, claim requirements and the treatment of a later disposal.

The focus should be on items of expenditure which will not be eligible for capital allowances, such as certain legal expenses or extraordinary expenditure.

If it is determined that the expenditure is in fact capital, it is possible that it qualifies

Continue reading the full document
To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™
Powered by Tolley+™

Popular Articles

Loans provided to employees

Loans provided to employeesEmployers sometimes provide their employees with loans, sometimes charging interest and often not, either as part of the reward package or to help the individual meet significant expenditure. For example, it is common to provide loans for the purchase of annual travel

14 Jul 2020 12:11 | Produced by Tolley Read more Read more

Inter-spouse transfer

Inter-spouse transferIntroductionWhen a chargeable asset is transferred between two spouses or civil partners, there is a disposal by the transferor spouse / civil partner and an acquisition by the transferee spouse / civil partner for capital gains tax purposes. For simplicity, spouses and civil

14 Jul 2020 12:01 | Produced by Tolley Read more Read more

Interest and penalties on late paid tax under self assessment

Interest and penalties on late paid tax under self assessmentInterestIf the capital gains tax, the balancing payment or payments on account of tax and / or Class 4 national insurance contributions (NIC) are paid late, HMRC will charge interest on the amount overdue from the original due date. The

14 Jul 2020 12:00 | Produced by Tolley Read more Read more