Allowable expenses

Produced by Tolley
Allowable expenses

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Allowable expenses
  • General items
  • Wholly and exclusively
  • Bad and doubtful debts
  • Unpaid remuneration
  • Employee benefit trust (EBT)
  • Pre-trading (letting) expenditure
  • Capital items
  • Replacement of domestic items
  • Energy savings items
  • More...

General items

Wholly and exclusively

Profits and losses of a UK property business are computed on broadly the same basis as trading profits and losses. The rule that expenditure must be ‘wholly and exclusively’ for the business applies accordingly. For further guidance on the general principles of computing trading profits and losses, see the Adjustment of profits ― overview guidance note.

This guidance note gives details of certain specific types of expenditure which are of most relevant to UK property businesses.

Bad and doubtful debts

Allowed as a deduction, provided the debt is:

  1. specified as having gone bad

  2. estimated to be bad, or

  3. released wholly and exclusively for the purposes of the trade as part of a statutory insolvency arrangement

See also the Bad debts guidance note.

Unpaid remuneration

If there's any unpaid employee remuneration accrued for and which would normally be allowed, this must be paid within nine months of the end of the period of account, otherwise a deduction won't be allowed until it is actually paid.

Employee benefit trust (EBT)

If the property investor wishes to establish an EBT the same restrictions as for trading businesses apply. Broadly speaking the legislation seeks to allow a deduction for a payment into an EBT only to the extent that there's a matching payment out from the EBT that is therefore taxable on the employee.

Pre-trading (letting) expenditure

Pre-trading expenditure is also allowed provided:

  1. it would qualify for a deduction had it been incurred at the start of the letting, and

  2. it was incurred within seven years of the commencement of the letting

Capital items

No deductions against rental income are allowed for items of a capital nature, although there is a separate regime for capital allowances.

Historically, the replacement of tools (meaning any implement, utensil or article) used in the property business was an allowable expense under CTA 2009, s 68 for transactions up to 31 March 2016. Relief for renewals (‘renewals allowance’) was subject

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