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A: This is a very difficult question to answer as there are few definitive rules. There have been, and continue to be, numerous cases in law to determine whether expenditure should be classified as capital or revenue expenditure, and sometimes the accounting treatment is not always in line with the tax treatment.

In very general terms, the cost of repairing an asset is revenue expenditure but the cost of improving the asset is capital expenditure. With newly acquired assets, the cost of repairing the asset to bring it into use would be capital expenditure, but any repair necessary to remedy normal wear and tear would generally pass as revenue expenditure.

Sometimes the nature of the expenditure is straightforward and easy to determine; at other times, research and discussion with HM Revenue & Customs (HMRC) is required to determine the correct tax treatment.