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HMRC internal manual

Capital Gains Manual

Expenditure: reimbursements, grants etc out of public money


No allowance may be given for expenditure otherwise allowable to the extent that it is met directly or indirectly by the Crown or any Government, public or local authority (in the United Kingdom or elsewhere).


Where Section 50 applies but the funds provided are later repaid in whole or in part Extra-Statutory Concession D53 may be applied to treat the consideration received on the disposal of the property as reduced by an amount equal to the amount repaid. The concession applies not only where there is a direct repayment of the funds provided but also where the repayment is made indirectly by a corresponding reduction in the amount of a later grant that would otherwise have been made.

The effect of the concession may be illustrated by an example. An asset cost £60,000 but this was partly met by a grant of £40,000. Section 50 applies to treat the cost of the asset as £20,000. Later the asset is sold for £90,000 and the grant is repaid out of the proceeds. By concession the sale proceeds are reduced to £50,000 (£90,000 - £40,000) and the gain before indexation allowance becomes £30,000 (£50,000 - £20,000).