Taxes Consolidation Act 1997 section 554

Exclusion of expenditure by reference to income tax

Section 554 provides that expenditure which is deductible for income tax purposes cannot also be treated as allowable expenditure in computing chargeable gains for capital gains tax purposes.

• Allowable expenditure for CGT purposes is confined to expenditure incurred on capital account; any expenditure deductible in computing income, profits, gains or losses for income tax purposes is excluded from the CGT computation.
• This exclusion applies regardless of how the income tax deduction takes effect — whether by reducing the tax charge, by discharge or repayment of tax, or otherwise — and applies even where there is insufficient income to absorb the deduction.
• Even where no trade or profession exists, expenditure is excluded if it would have been deductible as a revenue expense had the asset been held as fixed capital of a trade chargeable to income tax.
• By virtue of section 78(6), the same exclusion applies to expenditure taken into account for corporation tax purposes, ensuring consistent treatment across income tax and corporation tax.