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Hi,
In the video titled “Tax Adjusted Trading Profit – Individuals part 3” (when working through Example 1) – under Note 4: Repairs and renewals – why is it that the £2,200 spent decorating the shop is not added back into the Trading Profit calculation?
The reason I ask is because Note 4 also says “The building was in a usable state when it was purchased” – and the rules on Capital Expenditure say – “improvement to an asset is capital expenditure and is not allowable.” – would the redecoration of the shop be an improvement if the shop was already in a usable state?
Thank you.
Charley
everything needs to be maintained and I think you might be thinking too deeply about this.
The decrating is seen as a repair on a building used in the trade and it is therefore an allowable expense and does not need to be adjusted.
The examiner is trying to get you to differentiate between capital and revenue expenses.
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