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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Wasting assets: computation: allowable enhancement expenditure

TCGA92/S46

Normally you allow the full amount of any allowable enhancement expenditure incurred on the asset in calculating any gain arising on its disposal.  When you are dealing with a wasting asset you have to make the same assumptions as you do with the allowable acquisition cost.

In computing the gain arising on the disposal of a wasting asset you:

  • write off the enhancement expenditure over the predictable life of the asset from the time the expenditure is first reflected in the state or nature of the asset;
  • only allow any balance which has not been written off by the date of disposal.

In practice you calculate how much allowable enhancement expenditure has been written off by using a similar formula, the T(2) formula, to that used for acquisition cost, see CG76775.  CG76780 shows you how to use this formula.

Where allowable enhancement expenditure has been incurred more than once you simply repeat use of the formula the appropriate number of times.