What does capital expenditure mean under section 10 of the Capital Allowances Act 2001?

Under section 10, capital expenditure has a broad meaning. It includes not only direct spending on acquiring or creating an asset but also any contribution a person makes towards another party's capital expenditure. For example, contributing towards the cost of constructing an asset built by someone else counts as capital expenditure in its own right.

When does expenditure relate to an asset for capital allowances purposes?

Expenditure only relates to an asset if it is connected with the provision of that asset. Not all spending associated with an asset will necessarily qualify for capital allowances — it must be linked to bringing the asset into existence or into the ownership of the person claiming the allowance under the Capital Allowances Act 2001.

What does provision of an asset mean under section 10 of the Capital Allowances Act 2001?

Provision of an asset encompasses both the construction of a new asset and the acquisition of an existing one. This ensures the capital allowances rules apply equally whether a business builds an asset from scratch or purchases it ready-made, covering both scenarios under the same definitional framework throughout the chapter.

Can a contribution towards someone else's capital expenditure qualify as capital expenditure?

Yes. Under section 10, if a business contributes towards the cost of constructing an asset that another party is building, that contribution counts as capital expenditure. For instance, a company paying £50,000 towards a road built by a developer would treat that contribution as its own capital expenditure for allowances purposes.

Capital Allowances Act 2001 section 10

Interpretation

Section 10 defines key terms used throughout the chapter, specifically what is meant by "capital expenditure" and when expenditure is considered to relate to an asset.

Capital expenditure includes not only direct spending but also any contribution made towards capital expenditure
Expenditure is only treated as relating to an asset if it relates to the provision of that asset
The provision of an asset covers both its construction and its acquisition
These definitions apply throughout the chapter and underpin how allowances are determined

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member