BIM46901 - Specific deductions: repairs & renewals: provisions

Relevance of accounts treatment

Sometimes revenue expenditure on repairs will not all be charged to the profit and loss account when it is incurred; it may be spread over the next year or even over more than one later years. If so, follow the accounting treatment, assuming you are satisfied that the expenditure is not disallowable capital expenditure.

If repairs expenditure has been ‘capitalised’ and then depreciated in the accounts we follow the accounts for the timing of when to allow the expenditure for tax purposes.

Repairs to premises - timing

FRS12 applies to most provisions for periods ending after 22 March 1999. We accept that provisions correctly made under FRS12 are deductible except where there are specific tax rules to the contrary. For example provisions for capital expenditure are not tax deductible.

We previously held the view that ICTA88/S74 (1) (d) had the effect that expenditure on the repair of premises could only be allowed when the work was carried out. On this view a provision for future repairs was not allowable. The Special Commissioners in Jenners Princes Street Edinburgh Ltd v CIR (1998) SPC166 decided that ICTA88/S74 (1) (d) did not contain a timing rule.