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HMRC internal manual

Capital Gains Manual

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.