Capital expenditure is money spent by an organisation on purchasing a fixed asset such as land, buildings or equipment, which adds to the value of an existing fixed asset.
A broad definition of what falls within capital expenditure is the:
- acquisition, reclamation, enhancement or laying out of land, exclusive of roads, buildings and other structures
- acquisition, construction, preparation, enhancement or replacement of roads, buildings and other structures
- acquisition, installation or replacement of moveable or immovable plant, machinery and apparatus and vehicles and vessels
Enhancement in relation to any asset means the carrying out of works that are intended to:
- lengthen substantially the useful life of the asset
- increase substantially the open market value of the asset
- increase substantially the extent to which the asset can or will be used
Some examples of expenditure which are not capital expenditure include:
- the cost of leasing vehicles
- cyclical painting of buildings
- the purchase of equipment below £6,000 in value
- the repair of a damaged roof, although the replacement of the whole roof may be considered to be allowable
- feasibility costs of a proposed capital project
- the cost of an opening ceremony of a newly built or refurbished building
- publicity costs of a new building
- training of staff to use a new piece of equipment