Where expenditure is incurred on the acquisition, development or refurbishment (including alterations and improvements) of a property it is treated as capital expenditure, and as such the only tax deductions allowable will be capital allowances on Plant and Machinery and on qualifying buildings.
Refurbishing buildings also often includes certain works of repairs and maintenance, which can be treated as revenue in nature, and as such could be fully tax deductible in the year of expenditure.
The distinction between revenue expenditure and capital expenditure can be highly problematic and has been the subject of many tax cases. Consideration should also be given to the ‘Integral Features’ replacement provisions of the Capital Allowances Act, which may capitalize any expenditure incurred on the replacement of an Integral Feature within a building.
PJB are experienced in this complex area and are able to assist with the maximisation of the tax benefits available by ascertaining those works that can be allocated as a revenue expense, potentially giving rise to 100% allowances in the year of expenditure.
For further guidance on the distinctions between capital and revenue and information on the treatment of revenue expenditure, please contact us.