CIRD12550 - Core computational rules: deductible debits: general matters and adjustments for tax purposes: abortive expenditure on realisation

FA02/SCH29/PARA26

Background

The costs associated with realising an intangible asset are normally relieved under Schedule 29 by being deducted in arriving at the proceeds of realisation (see CIRD13240). Where, however, the expenditure proves abortive, because the asset is not in fact realised, the expenditure cannot be relieved in this way. Nor does it fall within paragraph 8 of Schedule 29 ( CIRD12530) because it is outside the definition of expenditure within the paragraph (see CIRD12250).

Provision

Paragraph 26 therefore deals specifically with this situation. Where expenditure is incurred for the purposes of a transaction that would have constituted the realisation of an intangible asset, but the transaction is not completed, the sum written off to a company’s profit and loss for a period of account as a result is a deductible debit for that period.

The deductible debit is subject to any adjustment required for tax purposes (see CIRD12030). An adjustment may be needed for example to disallow the costs of entertaining a prospective buyer (see CIRD12600).

Other abortive expenditure

Expenditure for the purpose of acquiring or creating an asset or for the other purposes described in CIRD12250, which turns out to be abortive, is subject to the same treatment as successful expenditure without the need for a special rule.