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MAX LEWIS, 29 Bedford Row Chambers
What is the difference between income and capital? This sounds like a simple question. Our instinctive reactions revolve around income as the periodic receipt of smaller sums, and capital as 'once and for all' larger sums whose role is to provide security, interest or both. This will do for most purposes. However, lawyers, accountants and the courts have all struggled to find a clear definitional dividing line. The best the accountants have been able to achieve is broadly to define 'capital expenditure' as that applied towards the 'acquisition, improvement or disposal of capital assets'. Circularity is of little help. Hire-purchase payments are a very good example of expenditure which cannot easily be categorised as income or capital. It is well known that dividends drawn from companies have caused the Child Support Agency (CSA) much confusion for many years for substantially the same reason. Lord Denning MR captured neatly the difficulty that problems of categorisation are really problems of definition.
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