Local Authority Capital Expenditure
Capital Expenditure is defined in the Local Government (Scotland) 2003 Act [the 2003 Act] as expenditure which, in accordance with proper accounting practices, falls to be capitalised. Proper accounting practice is currently accepted to be the CIPFA/ LASAAC Code of Practice on Local Authority Accounting: A Statement of Recommended Practice (known as the SORP). On this basis, capital expenditure essentially relates to the provision and improvement of significant fixed assets including land, buildings and equipment (such as schools, new houses and machinery) which will be of use or benefit in providing services for more than one financial year.
Capital income is made up mostly from the sale of these assets (known as capital receipts). Such capital receipts may only be used to finance other capital expenditure or be placed in the Capital Fund.
In England and Wales, there is some expenditure which legislation classifies as capital for local authority borrowing purposes, although it does not result in a fixed asset. No such exemptions are currently allowed in Scotland.