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HMRC internal manual

Capital Gains Manual

Capital allowances: asset acquired at capital allowance written down value


TCGA92/S41(3) applies where an asset is disposed of at a loss and the person making the disposal acquired the asset at its capital allowances written down value:

  • by a transfer by way of a sale in relation to which an election under CAA01/S569 was made (sales without change of control or between connected persons), or
  • by a transfer to which CAA01/S268 applies (succession to trade on death)

Section 41(3) requires that the capital gains allowable expenditure is restricted to take account of both:

  • capital allowances made to the transferor (including previous transferors) in respect of the asset,


  • capital allowances made to the transferee (the person making the disposal).

A similar restriction of the capital gains loss is required where:

  • CAA01/S264(3) (partnership uses the property of a partner),


  • CAA01/S558 (change of persons comprising the partnership that carries on the qualifying activity)

have been applied