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HMRC internal manual

Capital Gains Manual

Capital allowances: deemed disposals and reacquisitions

TCGA92/S41 - deemed disposals and reacquisitions

If an asset is disposed of at a loss, TCGA92/S41(2) tells you that in the computation of the loss, expenditure is to be excluded to the extent to which any capital allowance or renewals allowance has been or may be made in respect of it (see CG15410).

Certain provisions treat the owner of an asset as having disposed of and reacquired that asset at market value at a given date.  The result is that the reacquisition cost is not expenditure in respect of which a capital allowance or renewals allowance is made.  The following provisions allow section 41 to operate as intended:

  • TCGA92/SCH2/PARA3 for the purpose of rebasing to 31 March 1982 (see CG16900),
  • TCGA92/55(3) for the purpose of computing indexation by reference to market value at 31 March 1982 (see CG17450),
  • TCGA92/SCH2/PARA20 for the purpose of assets held at 6 April 1965 (see CG15510).

In these specific instances, section 41 applies by treating any capital allowance or renewals allowance as if it were made in respect of the expenditure that was deemed to have been incurred by the owner of the asset in reacquiring the asset.  For examples see CG16900 and CG17515.