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Initial repairs carried out by successor company

The mere fact that the ownership of an asset changes before repairs are undertaken does not in itself make the repair a capital expense¹.

Such repairs will generally fall to be treated as revenue if they would have been treated as revenue if there had been no change in ownership.

Exceptionally they will be treated as capital if, for example, the asset could not be used by the successor before undertaking the repairs or there is evidence that the purchase price of the asset was substantially reduced because of the dilapidated state of the asset. This is not the case if the purchase price merely reflects the reduced value of an asset due to normal wear and tear².

Transfer of assets that do not amount to a trade or part trade

Although the CTA 2010, Pt 22 Ch 1 (ss 940A–953) conditions apply when there is a part transfer of a trade (with the