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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Land: part-disposals: example

In 1968 a farmer acquired 20 acres of agricultural land, made up of 5 separate fields. The cost of the 20 acres was £10,000.

In 1970, one of the fields, amounting to 2 acres, was sold for £1,300. At that time, the market value of the entire 20 acres was £12,500.

A claim by the farmer under what is now TCGA92/S242 was accepted. As a result, the sale of the field was not treated as a disposal for Capital Gains Tax purposes and the allowable expenditure in respect of the remaining holding was treated as being £8,700.

In 1985, after the introduction of the special practice in CG71852, the farmer sold another field, this time of 6 acres, for £12,000. The benefit of the special practice in CG71852 was claimed. Under that practice, the allowable cost of the 6-acre field was arrived at by apportioning the total cost on the basis of area. Hence, the allowable cost of this field was £8,700 x 6/18 = £2,900.

It was necessary for the farmer to give an undertaking that it was accepted that the allowable expenditure relating to the three remaining fields was £8,700 - £2,900, that is £5,800.