Tax case highlights the importance of the difference between capital and revenue...

A recent tax case has highlighted the importance in the distinction between business expenditure classed as “revenue” and business expenditure classed as “capital”.  This distinction matters as only “revenue” expenditure can be claimed as an expense against your profits for tax purposes.
 
The case involved a farmers drive, which was dug up and resurfaced at a considerable cost.  HMRC’s argument was the expense was capital as it provided an entirely new and improved surface.
 
The farmer won the case by demonstrating that the work to the drive involved adding new surface to old tarmac, which was a repair of an existing asset.
 
If you are considering incurring significant capital expenditure on existing assets, discuss this in advance with your tax advisor to make sure you optimise the tax relief.
 
For further information or to discuss, please contact Lesley Sutton on 01484 550037 or taxchat@revellward.co.uk