Capital Allowances Act 2001 section 5

When capital expenditure is incurred

Section 5 establishes the timing rules for when capital expenditure is treated as incurred for the purposes of claiming capital allowances, including the general rule and several important exceptions.

• The general rule is that capital expenditure is treated as incurred when an unconditional obligation to pay arises, even if actual payment is due later
• Where an asset is received before the end of a chargeable period but the obligation to pay is triggered by a certificate or event occurring within one month after that period end, the expenditure is treated as incurred at the end of that period
• Where payment is not due until more than 4 months after the unconditional obligation arises, the expenditure is treated as incurred on the date payment is actually due
• An anti-avoidance rule prevents the timing of expenditure being brought forward by creating artificially early payment obligations solely to gain a tax advantage