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HMRC internal manual

Capital Allowances Manual

From
HM Revenue & Customs
Updated
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RDA: Disposal events and disposal values

CAA01/S443 - S444

These are the events that are disposal events:

  • Cessation of ownership of an asset representing qualifying expenditure.
  • Demolition or destruction of an asset representing qualifying expenditure while it is owned by the taxpayer.

 

Cessation of use for research and development is not a disposal event.

Example In the example at CA60500 if Graham had stopped using the building for research and development after 2 years and started to use it as a drugs factory there would not have been a disposal event then. There is not a disposal event until he sells the factory to Norman.

A sale is a disposal event because it is a cessation of ownership. In such a case the time of the cessation of ownership is the earlier of:

  • the time of completion, and
  • the time when possession is given.

 

These are the disposal values for different disposal events.

Disposal event Disposal value
   
Sale of asset at not less than market value Net sale proceeds
Demolition or destruction of asset Net amount received for the remains together with any insurance money or other capital compensation
Any other event Market value

 

Bring a disposal value to account for the chargeable period in which the disposal event occurs unless the trade has been permanently discontinued. If the trade is permanently discontinued before the disposal event bring the disposal value to account for the chargeable period in which the trade is discontinued.

No disposal value is brought to account if there is a plant and machinery balancing charge or an IBA balancing charge arising from the event. For example, a building constructed to use for research and development and on which RDA was claimed may change its use and become an industrial building. There is no clawback of allowances when the use of the building changes but when it is sold the RDA is recovered as an IBA balancing charge.