Computation: interaction with other taxes: IT: example
In 1986, Miss S buys a cottage which is not her main residence and incurs £5,000 in making good dilapidations. In 1990, she has the cottage rewired at a cost of £1,000 and has it redecorated throughout at a cost of £1,200. In 1990, she adds a garage at a cost of £2,000 and, in 1995, sells the whole asset.
In the computation of the chargeable gain or allowable loss on disposal, the allowable expenses are
- the cost of acquisition
- costs incidental to disposal
- £5,000 spent in making good dilapidations
- the £2,000 cost of the garage.The cost of rewiring and decorating is not allowable, because if the cottage had been a fixed asset used for the purposes of a trade, this would not have been capital expenditure.