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Repairs: Or is it?

By Mark McLaughlin, January 2021

Mark McLaughlin highlights a case in which the ‘capital or revenue expenditure’ issue was considered. 

The basic rules for allowable expenditure by sole traders and partnerships (or companies) appear straightforward, at least on the face of it. Profits of the trade are calculated in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law. 

Is it allowable? 

For the purposes of calculating profits for tax purposes, the main requirements for a deduction in calculating the profits of a trade are: firstly, that the expenditure is incurred ‘wholly and exclusively’ for the purposes of the trade; and secondly, that it must not be capital in nature (there is an exception for certain capital expenditure by ‘cash basis’ businesses, which are not considered here).  

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