Capital and revenue expenditure

Buying something that lasts, versus paying for something consumed. Different accounting and different tax.

What it means

Capital expenditure buys or improves a long-lived asset. Revenue expenditure is the day-to-day running cost.

Why it matters

Capital spend goes on the balance sheet and is depreciated; revenue spend hits the profit and loss immediately. The tax treatment differs too — capital allowances rather than a deduction.

What it looks like in practice

Repairs are revenue; improvements are capital. Replacing a roof like for like is usually a repair; replacing it with something better is usually capital.

What to watch out for

Getting the split wrong changes both the reported profit and the tax. HMRC pays attention to large "repairs" that look like improvements.

Where to get proper advice

Your accountant. This is exactly the kind of question they answer in ten minutes and most owners never ask.