Commentary

B3.104 Capital allowances―date of expenditure and time of sale

Business tax
Business tax | Commentary

B3.104 Capital allowances―date of expenditure and time of sale

Business tax | Commentary

B3.104 Capital allowances―date of expenditure and time of sale

The date on which expenditure is incurred is important in determining in which chargeable periods capital allowances can be given. Equally, the time of sale will determine the chargeable period in which a disposal value must be brought into account or allowances otherwise cease.

Date of expenditure

Capital expenditure is treated as incurred as soon as there is an unconditional obligation to pay it, whether or not there is a later date by which some or all of that amount is required to be paid. This is subject to the exceptions described below1. According to HMRC, the date on which the obligation to pay becomes unconditional depends on the terms of the contract concerned; that date is not necessarily the date on which the contract is made or the invoice is issued. HMRC considers that, where the purchaser is required to pay for it on or within a specified time of delivery, the obligation to pay becomes unconditional when the asset is delivered2.

There are provisions3 to guard against artificially long credit periods and to cover situations where title passes before there is an unconditional obligation to pay. Where, as the result of any agreement, an amount of capital expenditure is not required to be paid until a date more than four months after the unconditional obligation to pay has come into being, the amount is to be treated as incurred on that date4.

It might also be the case that in order to

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