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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Capital allowances: wasting assets qualifying for in full or in part

TCGA92/S45, TCGA92/S46, TCGA92/S47

Wasting asset qualifies for capital allowances in full

If an asset is a wasting asset (see CG15440) and the expenditure on the asset has qualified in full for capital allowances throughout the period of ownership then TCGA92/S47 applies.  The effect of section 47 is that you calculate the gain or loss on the disposal as if the asset isn’t a wasting asset.  However TCGA92/S41 will still apply in the normal way to restrict any loss on the disposal of the asset (see CG15400).

NOTE if the asset is a chattel (tangible moveable property) then the chattel exemption (TCGA92/S262) may apply (see CG76550+).

Where the interest in the asset being disposed of:

  • is a lease for the purposes of TCGA92/S240 and TCGA92/SCH8 (leases), and
  • the duration of that lease will not exceed 50 years so that it is a wasting asset, and
  • the lease qualifies in full for capital allowances,

then you calculate the gain or loss on the disposal as if the lease isn’t a wasting asset.  However section 41 will still apply in the normal way to restrict any loss on the disposal of the lease (see CG15400).

Wasting asset qualifies for capital allowances in part

If a wasting asset doesn’t fall within TCGA92/S45(3A) (see CG76722) and has:

  • been used partly for the purposes of a trade, profession or vocation and partly for other purposes, or
  • been used for the purposes of a trade, profession or vocation for part of the period of ownership, or
  • otherwise qualified in part only for capital allowances,

then on a disposal of the asset you will need to apportion the consideration and the expenditure in order to make two computations.

The expenditure allowable under TCGA92/S38(1)(a) & (b) (see CG15150+) is apportioned by reference to the extent to which that expenditure qualified for capital allowances.  When apportioning the expenditure, you should consider the extent to which the asset qualified for capital allowances over the whole period of ownership.

The apportionment of the consideration should follow any apportionment of the consideration which has been made for capital allowances purposes.  If no such apportionment has been made, the apportionment of the consideration should normally follow the apportionment of the expenditure.

The computation of the gain is then made separately in relation to the apportioned parts of the expenditure and consideration (sections 45(3)(b) and 47(2)(b)).

PART APPORTIONED TO BUSINESS USE: You calculate the gain or loss as if the asset isn’t a wasting asset.  However section 41 will still apply in the normal way to restrict any loss on the disposal of the asset (see CG15400).

PART APPORTIONED TO NON-BUSINESS USE: If the asset is a chattel then section 45(1) will apply and the apportioned computation of the disposal will be exempt (see CG15440).  Otherwise section 46 or schedule 8 paragraph 1 will apply in computing the gain apportioned to the non-business use of the asset (see CG76772 onwards and CG71141 onwards).

NOTE if the asset is a chattel (tangible moveable property) then the chattel exemption (TCGA92/S262) may apply (see CG76550+).

See CG15450 for an example involving a wasting asset that qualified for capital allowances in part only.