Income Tax (Trading and Other Income) Act 2005 section 307B

Cash basis: capital expenditure

Section 307B restricts the types of capital expenditure for which deductions may be claimed when calculating the profits of a property business using the cash basis.

• Capital expenditure on acquiring or disposing of a business, on education or training, on land, and on assets for use in residential property is generally not deductible, though replacement domestic items relief may be available for residential property assets.
• A limited exception allows deductions for depreciating fixtures installed on qualifying land (i.e. land that is not a dwelling-house used in a property business), provided the fixture is not a building, structural element, waste disposal or sewerage system, or lift shaft.
• No deduction is permitted for capital spending on non-depreciating assets, assets not intended for continuing business use, cars, non-qualifying intangible assets, or financial assets — where a depreciating asset is one reasonably expected to reach the end of its useful life or lose 90% or more of its value within 20 years.
• Where an asset is used partly in residential property and partly for other purposes, the expenditure must be apportioned on a just and reasonable basis between the deductible and non-deductible elements.