B2.306 General tests for distinguishing between capital and revenue expenditure
There have been a large number of cases that consider the distinction between capital and revenue expenditure, which have helped to build up a body of evidence that the courts will consider when involved in disputes of this nature. However, a review of the case law in this area shows that there are no set tests which can be applied to a wide range of scenarios and each case will be considered on the basis of the facts in hand.
In considering these tests it is essential to bear in mind that no one test is conclusive in any particular case. However, if a particular payment or receipt satisfies every test, there is at least strong reason for the view that the item in question is capital or revenue according to the result which the tests yield. The question has to be looked at reasonably, and, in the ultimate analysis, has to be decided by the Tribunal (formerly General or Special Commissioners) on appeal. The question may be a mixed one of law and fact, and the decision of the First-tier Tribunal (formerly Commissioners) is also open to review by the Upper Tribunal or courts (see Division A5.6).
This proposition was stated by Viscount Simon in Doncaster Amalgamated Collieries Ltd1 as follows:
'The borderline between revenue and capital expenditure is sometimes difficult to draw, and there may be cases in which the conclusion is properly reached by the Commissioners as a question