Commentary

B2.404 Assets—expenditure following purchase of asset

Business tax
Business tax | Commentary

B2.404 Assets—expenditure following purchase of asset

Business tax | Commentary

B2.404 Assets—expenditure following purchase of asset

The costs of acquiring a fixed asset will be capitalised on the balance sheet in accordance with GAAP and will therefore not be deductible for the purposes of calculating trading profits. However, expenditure on repairs to a newly-acquired capital asset may be deductible provided, at least, that1:

  1.  

    •     the cost is properly charged to the income statement in accordance with the correct principles of GAAP

  2.  

    •     the repairs are not actually improvements and would still have been treated as revenue expenditure if ownership had not changed

  3.  

    •     the expenditure was not incurred to make the asset commercially viable, or make it in a fit state to use following its acquisition, and

  4.  

    •     the purchase price was not substantially less than it would have been if it had been in a proper state of repair at the time of purchase

If the costs of the repairs are not charged to the income statement, a deduction will be denied, as in the Turners (Soham)2 case.

See generally BIM35430 onwards and BIM46935, which give detailed guidance on HMRC's views relating the difference between a revenue

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