General
Provides general checks to make and what risks and mitigations to consider, including explanations and examples.
Risk
Depreciation of capital items is generally not an allowable expense for tax purposes, except where the asset is within the corporate intangible assets regime. There is a risk that the depreciation may not be added back to profit in the tax computation where appropriate. Depreciation of capital items should be added back in the computation even where capital allowances have not been claimed.
Mitigation
Ensure that depreciation of capital items is added back to the profit in the tax computation where appropriate.
Explanation
For companies the amortisation of goodwill and other fixed intangible assets is allowable in certain circumstances.
Further information
- Business Income Manual — BIM42051 provides further guidance on the basic principles for deductions
- Business Income Manual — BIM35501 (opens in new browser) details the provisions overriding the capital/revenue divide for intangible assets
In addition, any profit or loss on disposal should be deducted or added back in the computation as appropriate.