Owner-Managed Businesses

When expenditure is ‘incurred’

Produced by Tolley
  • 21 Mar 2022 07:24

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • When expenditure is ‘incurred’
  • Capital allowances timing of expenditure
  • Pre-trading expenditure
  • Deposits
  • Hire purchase agreements and leasing

When expenditure is ‘incurred’

Capital allowances timing of expenditure

Capital allowances are received in the accounting period in which expenditure on plant and machinery is ‘incurred’.

The normal rule is that expenditure is incurred on the date on which the obligation to pay becomes unconditional. This may be set by the contract to purchase the plant and machinery.

Where there is no contract, or the contract contains no specific agreement as to terms of payment, a person buying goods is legally required to pay for them on delivery. Therefore in most cases expenditure is incurred when the goods are delivered.

There is an exception to the general rule. If there is a gap of more than four months between:

  1. the date on which the obligation to pay becomes unconditional, and

  2. the date on which payment is required to be made

the expenditure is not incurred for capital allowances

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