Accounting, Taxation, Tips

Understanding Capital Expenditure

People often ask where the line is between what can be written off in the accounts as expenses and what qualifies as capital expenditure (spent on fixed assets).

A good rule of thumb is applying the 2-year tenure. If what you purchase or introduce into the business will last less than 2 years, write it off as expenses –  you may want to have a look at a list of typical expenses in my earlier post. If, on the other hand, the item will last 2 years or more, treat as capital expenditure.

Once a decision has been made, the next thing to think about is the type or level of capital allowance(s) you can claim, for example, an item may qualify for annual investment allowance (AIA), first year allowance (FYA) or writing down allowance (WDA). More on these in future posts so ffollow this site for updates.

In the meantime, the following are examples of fixed assets that capital expenditure may relate to:

  • Agricultural buildings and works.
  • Bicycle.
  • Books including reference books.
  • Camera, projector, screen.
  • Carrying case.
  • Computer and printer.
  • Fax Machine.
  • Goodwill.
  • Industrial buildings.
  • Know-how.
  • Legal expenses on purchase of property.
  • Motorcycle.
  • Motor vehicle including car and van.
  • Office furnishings including carpets and curtains.
  • Office furniture including desk, chair, filing cabinets and bookcase.
  • Plant and machinery (equipment).
  • Property.
  • Photocopier.
  • Research and development.
  • Telephone including mobile phone.

Note that I accept no liability or responsibility for any loss suffered as a result of your reliance on the content of this page. If you need help tailored to your circumstances, speak to your accountant or get in touch with me.

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About Phoenix

Accountant and Home Educator

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