Allowable expenses

By Tolley

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

  • Allowable expenses
  • General items
  • Bad and doubtful debts
  • Unpaid remuneration
  • Employee benefit trust (EBT)
  • Pre-trading (letting) expenditure
  • Capital items
  • Replacement of domestic items
  • Energy savings items
  • Accountancy fees
  • Travelling costs
  • Lease premiums
  • Repairs v improvements
  • Interest costs for companies

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 Trading income – general principles guidance note.

CTA 2009, s 210

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:

  • specified as having gone bad
  • estimated to be bad, or
  • 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. See the Employee remuneration guidance note for further guidance.

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:

More on Tax computations: