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HMRC internal manual

Business Income Manual

Private Finance Initiative (PFI): pre-trading expenditure

S61 Corporation Tax Act 2009

Where pre-trading revenue expenditure is charged to the profit and loss account and is not capitalised, it is treated as incurred on the day on which the trade commenced (see BIM46350).

An example in the context of the PFI, is pre-trading bid expenses incurred before the award of a PFI contract is virtually certain. These are charged to the profit and loss account and cannot subsequently be capitalised under Urgent issue task force abstract 34 ‘Pre-contract costs’ (see BIM64115).

Where pre-trading revenue costs are capitalised they do not qualify for relief, since the expenditure will be deductible in arriving at the taxable profits for a period after trading has commenced. That is, the expenditure will be relieved either when it is written off to the profit and loss account, or matched against income credited to the finance debtor (see BIM64130).

However, special statutory rules apply for pre-trading interest (see BIM64325 onwards).