Capital vs Revenue Expenditure

Looking from a layman’s perspective all outgoings for a business are expenses. Whether it be buying a business vehicle or paying a supplier. At the end of the day its money going out of the business and should be deductible in the tax returns.

However like everything else in tax it is not so simple. There are two types of expenditure Revenue and Capital. Revenue expenditure is your everyday business expenses such as paying suppliers, entertainment, office expenses, paying employees etc. These expenses are generally deductible in the same income year they are incurred in.

Capital Expenditure is expenses incurred to buy or upgrade a fixed asset. Such as buying a business vehicle or buying new machinery. These expenses are not fully deductible in the same income year. In case of fixed assets these are depreciated according to their estimated useful life.

Revenue and capital expenditure can also differ from business to business. For example buying a company car will be capital expenditure for a cleaning business however it will be revenue expenditure for a car dealer.

Still confused about what’s deductible for your business, contact us for answers to your specific questions.