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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Wasting assets: use in another person's business


CG76721 explains that plant and machinery are always wasting assets.  It’s possible for a person who owns a chattel (tangible moveable property) that would not normally be a wasting asset, such as an antique, fine art or jewellery, to lend that asset to another person carrying on a business.  If the asset performs a function in the business then it may be plant.

As the person who beneficially owns the asset isn’t operating the business then it’s unlikely that capital allowances can be claimed.  The asset may be exempt for part or all of the period of ownership under TCGA92/S45(1) (see CG15450) unless section 45(3B) applies.

When section 45(3B) applies

From 6 April 2015 (1 April 2015 for companies), section 45(3B) may apply to the disposal of an asset which meets all of the following conditions:

  • at any time in the period of ownership of the person making the disposal, the asset is used for the purposes of a trade, profession or vocation carried on by another person;
  • as a result of that use, the asset acquires the character of plant;
  • if the asset wasn’t plant then it would have had a predictable life exceeding 50 years meaning it wouldn’t have been a wasting asset; and
  • the disposal is not within section 45(3C).

Section 45(3C) applies to certain disposals of an asset leased as plant under a long funding lease.

Effect of section 45(3B)

Where section 45(3B) applies, the asset will still be plant and therefore a wasting asset. However if the asset is a chattel then the exemption provided by section 45(1) won’t apply to the disposal.  The normal rules for computing the gain will apply.

Where an asset 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 only, or
  • qualified in part only for capital allowances,

then section 45(3) will normally apply (see CG15452).  However where section 45(3B) applies, section 45(3A) removes any apportionment of the gain under section 45(3).  The practical effect of this is that the whole of any gain on the disposal will be chargeable.

Note that section 45(3B) applies to disposals that result in losses the same way it applies to disposals that result in gains.