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Splitting expenditure between capital and revenue

Shared from Tax Insider: Splitting expenditure between capital and revenue
By Sarah Bradford, April 2022

Sarah Bradford considers how to differentiate between capital and revenue expenditure, and why it matters. 

Expenditure may be capital or revenue in nature. The distinction is important as it will determine how the expense is treated for tax purposes and the relief (if any) which is available.  

While it will often be the case that an item of expenditure will be wholly capital or wholly revenue, there may be occasions where capital improvement work and revenue repairs are undertaken at the same time. This will necessitate splitting the expenditure between capital and revenue. 

Capital expenditure 

Capital expenditure is expenditure on items that are retained within the property business and which either form part of the land or structure or which are used to generate revenue. In the context of a property business, items of capital expenditure will include the

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