BIM72035 | Cash basis: expenses: capital expenditure

S33A ITTOIA 2005

In calculating the profits of a trade on the cash basis, capital expenditure is treated as an allowable business expense with the exception of expenditure on or in connection with:

• The acquisition or disposal of a business or part of a business

• Education or training

• The provision, alteration or disposal of

1. An asset which is not a depreciating asset i.e. whose useful life will not end or will not decline in value by 90% or more within 20 years of the date of the expenditure. The useful life of an asset ends when it could no longer be of any use to any person for any purpose, as an asset of the business.

2. An asset not acquired or created for continuing use in the trade.

3. A car, however capital allowances continue to be available provided the business mileage rate (see BIM75005) has not been claimed on the car. Car has the same meaning as in Part 2 of CAA 2001. See CA23535 for an outline of the capital allowances rules on cars and CA23510 for guidance on the meaning of car.

4. Land (see BIM72036)

5. Non-qualifying intangible assets (see BIM72037)

6. A financial asset (see BIM72038) Any right under or in connection with a financial instrument or other arrangement resulting in an economically equivalent return.

Capital Gains tax

S47A TCGA 1992

Where an asset is disposed of capital gains are not chargeable where the asset disposed of has been relieved at any time under the cash basis.

Proceeds are instead either brought into account as a trade receipt (see BIM72020) or brought into account as disposal proceeds under the Capital Allowances rules. This applies even if a person is not currently using the cash basis at the time the asset is disposed of.