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HMRC internal manual

Capital Gains Manual

Expenditure: enhancement expenditure: example

In March 2005, Mr T buys a plot of land for £200,000 (including expenses). This does not form part of a garden within TCGA92/S222. He lays out on it a tennis court at a cost of £5,000. In April 2010, he does away with the tennis court and builds in its place a swimming pool at a cost of £15,000. In February 2012 he sells the land for £250,000 (after deduction of expenses).

The £5,000 which he spent on the tennis court is not allowable because it is not reflected in the state of the land on its disposal. The computation is therefore as follows:

        £
         
  Net sale proceeds     250,000
Less Cost of land   200,000  
  Cost of swimming pool   15,000 215,000
  Capital Gain     35,000

 

NOTE: The demolition of a tennis court is not the `entire loss, destruction, dissipation or extinction of an asset’ within TCGA92/S24 (1), see CG13120+, because it is not an `asset’: it is only part of an asset, the land. And it is not within Section 24(3), see CG15770+ because it is not a building or a structure in the nature of a building.