Part 2Trading income
F1Chapter 17ACash basis: adjustments for capital allowances
Adjustments on entering cash basis
240DAssets not fully paid for
(1)
This section applies if—
(a)
a person carrying on a trade enters the cash basis for a tax year,
(b)
(c)
not all of the relevant expenditure has actually been paid by the person.
F4(1A)
“Relevant expenditure” means expenditure—
(a)
for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the tax year, and
(b)
in respect of which the person has obtained capital allowances under Part 2, 5, 6, 7 or 8 of CAA 2001.
(2)
If the amount of the relevant expenditure that the person has actually paid exceeds the amount of capital allowances given in respect of the relevant expenditure, the difference is to be deducted in calculating the profits of the trade for the tax year.
(3)
If the amount of the relevant expenditure that the person has actually paid is less than the amount of capital allowances given in respect of the relevant expenditure, the difference is to be treated as a receipt in calculating the profits of the trade for the tax year.
(4)
F5Any question as to whether or to what extent expenditure is relevant expenditure, or as to whether or to what extent any capital allowance obtained is in respect of relevant expenditure, is to be determined on such basis as is just and reasonable in all the circumstances.
(5)
If the amount of capital allowances given F6under Part 2 of CAA 2001 in respect of the relevant expenditure has been reduced under section 205 or 207 of CAA 2001 (reduction where asset provided or used only partly for qualifying activity), the amount of the relevant expenditure that the person has actually paid is to be proportionately reduced for the purposes of this section.
F7(6)
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