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Capital allowances timing of expenditure

Capital allowances are received in the accounting period in which expenditure on plant and machinery is ‘incurred’.

The normal rule is that expenditure is incurred on the date on which the obligation to pay becomes unconditional. This may be set by the contract to purchase the plant and machinery.

Where there is no contract, or the contract contains no specific agreement as to terms of payment, a person buying goods is legally required to pay for them on delivery. Therefore in most cases expenditure is incurred when the goods are delivered.

There is an exception to the general rule. If there is a gap of more than four months between:

1. •

   the date on which the obligation to pay becomes unconditional, and

2. •

   the date on which payment is required to be made

the expenditure is not incurred for capital allowances purposes until the date on which payment is required to be made. The only exception is where this gap is normal commercial practice in the relevant industry.

If some