The date on which expenditure is incurred is important in determining in which chargeable periods capital allowances can be given. Equally, the time of sale will determine the chargeable period in which a disposal value must be brought into account or allowances otherwise cease.
Date of expenditure
Capital expenditure is treated as incurred as soon as there is an unconditional obligation to pay it, whether or not there is a later date by which some or all of that amount is required to be paid. This is subject to the exceptions described below1. According to HMRC, the date on which the obligation to pay becomes unconditional depends on the terms of the contract concerned; that date is not necessarily the date on which the contract is made or the invoice is issued. HMRC considers that, where the purchaser is required to pay for it on or within a specified time of delivery, the obligation to pay becomes unconditional when the asset is delivered2.
There are provisions3 to guard against
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