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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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MEA: Allowances and charges: Balancing allowances: disposals and part disposals

Disposal receipts are brought into account where assets are disposed of or otherwise permanently cease to be used for the purposes of a mineral extraction trade.

Where part of an asset is disposed of a claim to a balancing allowance is acceptable in principle under CAA01/S571. This treats the retained part of the asset and the part of the asset disposed of as separate assets.

In the case of a part disposal the taxpayer may find it easier to deduct the disposal receipt from the balance of qualifying expenditure without taking the benefit of the balancing allowance. This is acceptable if the disposal is not to a mineral trader. If it is not then it is necessary to compute the seller’s allowances for the part disposed of and the part retained as if each were a separate asset. This is so that the buyer’s secondhand cost restriction (under CAA01/S407 and CAA01/S411) can be computed.

If expenditure has been grouped together for convenience, there is no objection to the practice of deducting the disposal receipt from the balance of qualifying expenditure.

However, a separate computation in respect of individual assets will be required where there are disposals to a mineral extraction trader and it is necessary to apply the secondhand cost restriction rules in CAA01/S407 and CAA01/S411.