CIRD11690 - Intangible assets within FA02/SCH29: time test: general conditions: time when asset created or acquired: expenditure incurred rule

FA02/SCH29/PARA123 - 125

The time when expenditure on the acquisition of an asset is incurred depends largely on when the expenditure would be regarded as incurred under the corporation tax rules that would have applied in the absence of Schedule 29.

1. If the expenditure would have qualified for capital allowances it is regarded as incurred when an unconditional obligation to pay it arises. This is the basic rule for capital allowances - see CAA01/S5 and CA11800.
2. If the expenditure would not have qualified for any tax relief against income, it is regarded as incurred when the asset would have been acquired for CG purposes (see in particular TCGA92/S28 and CG14250 onwards). This is subject to the exception described in paragraph 3 below.
3. If under the CG rule the asset is regarded as acquired on or after 1 April 2002 but for accounting purposes the expenditure is recognised before 1 April 2002, the expenditure is regarded as incurred when it is recognised for accounting purposes.
4. If, exceptionally, the expenditure would have qualified for tax relief against income, other than by way of capital allowances, it is also regarded as incurred when it is recognised for accounting purposes.

These rules are not in point if the asset falls within CIRD11680 and CIRD11685 (internally generated goodwill and other assets built up out of revenue expenditure).