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HMRC internal manual

Capital Gains Manual

Expenditure: enhancement expenditure: demolition costs

You may accept that demolition costs are permanently reflected in the state of the land bythe absence of the demolished building. In practice, the sole test of allowability iswhether the purpose in incurring the expenditure was to enhance the value of the asset.For example, if a building is erected in a garden and is subsequently removed and thegarden reinstated, neither the cost of the building nor of its removal will normally beallowable. But where the cost of demolition is small in relation to the cost ofconstructing a new erection, no adjustment need be made.