Part 1 Introduction

Chapter 1 Capital allowances: general

4 Capital expenditure

(1)

In this Act “capital expenditure” and “capital sums” are used in the sense given in this section.

(2)

“Capital expenditure” and “capital sums” do not include, in relation to a person incurring the expenditure or paying the sums—

(a)

any expenditure or sum that may be deducted in calculating the profits or gains of a trade, profession or vocation or property business carried on by the person, F1...

F2(aa)

any cash basis expenditure, other than expenditure incurred on the provision of a car, or

F3(b)

any expenditure or sum that may be allowed as a deduction under a relevant provision from the taxable earnings from an employment or office held by the person.

F4(2ZA)

In subsection (2)(aa)—

“cash basis expenditure” means any expenditure incurred—

(a)

in the case of a trade, profession or vocation, at a time when F5the cash basis applies in relation to the trade, profession or vocation F6(see section 24A of ITTOIA 2005), or

(b)

in the case of a property business, in a tax year for which the profits of the business are calculated on the cash basis (see section 271D of that Act); and

“car” has the same meaning as in Part 2 (see section 268A) .

F7(2A)

In subsection (2)—

“relevant provision” means any of the following—

(a)

section 262;

(b)

section 232 of ITEPA 2003 (giving effect to mileage allowance relief);

(c)

Chapters 2 to 6 of Part 5 of that Act (general deductions allowed from earnings); and

F8(d)

sections 188 to 194of FA 2004 (contributions under registered pension schemes), and

“taxable earnings” has the meaning given by section 10 of ITEPA 2003.

(3)

“Capital expenditure” and “capital sums” do not include, in relation to a recipient of the expenditure or sums—

(a)

any amounts that are to be added in calculating the profits or gains of a trade, profession or vocation or property business carried on by the recipient, or

(b)

any amounts that are F9earnings of an employment or office held by the recipient.

(4)

“Capital expenditure” and “capital sums” do not include, in relation to—

(a)

a person incurring the expenditure or paying the sums, or

(b)

a recipient of the expenditure or sums,

any expenditure or sum in the case of which a deduction of income tax falls or may fall to be made under F10Chapter 6 of Part 15 of ITA 2007 (deduction from annual payments or patent royalties) or under section 906 of that Act (certain royalties etc where usual place of abode of owner is abroad).

F11(5)

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