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HMRC internal manual

Capital Gains Manual

Computation: interaction with other taxes: IT: example

Mr R buys a picture for £100,000. He pays £5,000 to have it restored and reframed. At a cost of £10,000 he equips a room having controlled temperature and humidity for the preservation of the picture and fitted with suitable security devices. If Mr R then disposes of the picture, in computing the chargeable gain or allowable loss on the disposal:

  • the cost of restoring and reframing the picture is allowable expenditure
  • the cost of equipping the room, although capital expenditure incurred solely for the purpose of preserving the picture, is not allowable expenditure because it is not incurred on the asset
  • the cost of heating and lighting the room is revenue expenditure and consequently not allowable (notwithstanding that it is in connection with the ownership of the picture).