Chapter 2: Qualifying expenditure
Overview
1602.This Chapter defines “qualifying expenditure” and excludes certain expenditure from being qualifying expenditure.
1603.Section 454 defines “qualifying expenditure”, stops a person taking it into account for more than one trade and deals with expenditure incurred before the trade starts.
1604.Section 455 stops certain expenditure being qualifying expenditure if:
it is relieved in some other way;
treated as on goodwill; or
arises from a transaction between certain persons and there is common control.
Section 454: Qualifying expenditure
1605.This section is based on section 530(1) and (7) and section 531(3) of ICTA. It defines “qualifying expenditure”.
1606.Subsection (1) lists the expenditure on acquiring know-how that is qualifying expenditure. A person must carry on a trade in order to have qualifying expenditure but that expenditure may be incurred before the trade starts.
1607.Subsection (2) stops capital allowances being given more than once on the same qualifying expenditure. This provision does not appear explicitly in ICTA. See Note 59 in Annex 2.
1608.Subsection (3) ensures that qualifying expenditure qualifies for allowances when the relevant trade starts in the case of qualifying expenditure incurred before that trade starts.
1609.Subsection (4) defines a term used in subsection (3).
Section 455: Excluded expenditure
1610.This section is based on sections 530(1) and 531(2) and (7) of ICTA. It deals with those cases in which expenditure on know-how is not qualifying expenditure.
1611.Subsection (1) excludes expenditure that has been deducted in some other fashion – for example under section 531(5) of ICTA.
1612.Subsections (2) and (3) exclude expenditure if the buyer and seller are under common control.
1613.Subsection (4) excludes expenditure that section 531(2) of ICTA treats as expenditure on goodwill for all the purposes of corporation tax, income tax and capital gains tax.
