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 is better to avoid drawing a distinction, if possible. For example, where any capital element is potentially covered by the annual investment allowance or first year allowances (FYAs) for companies, there is no benefit to be gained from spending time analysing the potential for being able to treat the expense as revenue. The amount of tax relief would ultimately be the same.

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

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

Self assessment ― estimates and provisional figures

Self assessment ― estimates and provisional figuresIf the taxpayer does not have sufficient information to enable them to complete the tax return in the time allowed, they should include either a best estimate or a provisional figure. The taxpayer should not either leave a box blank or enter

14 Jul 2020 13:37 | Produced by Tolley Read more Read more

Holdover relief for disposals by trustees

Holdover relief for disposals by trusteesOverviewWhere a capital gain has been realised on an asset that has been disposed of and that disposal was not for full value (that is not in an arm’s length sale) then holdover relief may be available. This will happen when trustees appoint capital assets

14 Jul 2020 11:54 | Produced by Tolley Read more Read more

Parking provision and expenses

Parking provision and expensesCar parking facilities at or near to the employee’s workplaceThere is an exemption from tax and NIC where an employer provides parking, or pays for or reimburses an employee for the costs associated with car parking at or near the place of work; there are no reporting

14 Jul 2020 11:09 | Produced by Tolley Read more Read more