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HMRC internal manual

# Capital allowances: wasting assets qualifying in part for: example

A wasting asset is purchased for £26,000. Suppose the asset

• has a predictable life of 21 years,
• has a scrap value of £1,000,
• is used 40% of the time for business, and
• qualifies for capital allowances on the business part.

If the asset is sold 7 years later in 1992 for £10,000 the computation is in two parts

NON-BUSINESS USE: This is the disposal of a wasting asset costing £15,600 (60% of £26,000) for £6,000 (60% of £10,000). The wasting asset restriction is, see CG76700+

• 60% of (£26,000 - £1,000) = £15,000 x 5Yr/21yr = £5,000,

so the restricted allowable expenditure, the wasted cost, is

• £15,600 - £5,000 = £10,600.

The loss is computed as follows

 £ Disposal proceeds 6000 Less Wasted cost 10600 Unindexed loss (4600) Less Indexation (say) 10,600 x 0.3 3180 Loss (7780)

BUSINESS USE: This is the disposal of a non-wasting asset costing £10,400 (40% of £26,000) for £4,000 (40% of £10,000). The disposal is at a loss so the allowable expenditure is restricted by the net capital allowances given £6,400, see CG15410+

The loss is computed as follows

 £ Disposal proceeds 4000 Less Cost 10400 less Section 41 restriction 6400 4000 Unindexed loss Less Indexation (say) 4,000 x 0.3 1200 Loss (1200)

The allowable loss accruing on the disposal is therefore

£7,780 + £1,200 = £8,980