Income Tax (Trading and Other Income) Act 2005 section 33A

Cash basis: capital expenditure

Section 33A sets out which types of capital expenditure can and cannot be deducted when calculating trading profits under the cash basis.

• Capital expenditure on acquiring or disposing of a business, and on education or training, is never deductible under the cash basis
• Capital spending on cars, land, financial assets, non-depreciating assets, assets not used on a continuing basis in the trade, and non-qualifying intangible assets is also disallowed
• A "depreciating asset" — one whose useful life ends or whose value drops by 90% or more within 20 years — generally qualifies for a deduction, including certain fixtures attached to land (but not buildings, walls, drainage systems and similar structures)
• Intangible assets are "non-qualifying" (and therefore not deductible) unless they have a fixed maximum duration that expires within 20 years of the expenditure date, and financial assets covering financial instruments or economically equivalent arrangements are likewise excluded

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