Commentary

B2.307A Capital vs revenue expenditure—other items

Business tax
Business tax | Commentary

B2.307A Capital vs revenue expenditure—other items

Business tax | Commentary

B2.307A Capital vs revenue expenditure—other items

Although a number of keys tests have been developed over time, the general rule remains that no deduction may be claimed in respect of expenditure which is capital rather than revenue in nature (but see B2.304 regarding certain capital expenditure which is allowed as a deduction under the cash basis for small businesses from 2013/14). This general principle has been applied in the context of a huge variety of costs, as highlighted by the cases described below.

Capital vs revenue—loans, investments and other finance related payments

In the Taylor1 case, a self-employed architect made a substantial loan to a building company for a year repayable at a premium and carrying a high rate of interest. He was subsequently appointed consultant to the company. The company failed and the loan had to be written off. The loss was not allowed. The Commissioners considered that the loan was a capital investment, and that it was not incurred wholly and exclusively for the taxpayer's profession.

In Stone & Temple2 a money-lending subsidiary company advanced money to an individual following a failed restaurant venture involving the group. The individual agreed to purchase the restaurant and keep it open, but to share the proceeds if it was sold. The company claimed a deduction in computing its corporation tax liability, on the basis that advances to the individual were revenue in nature because they protected an investment. The High Court dismissed appeals by the companies and held that the monies represented a

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