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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Wasting assets: computation: using the T(2) formula


This instruction shows you how to use the T(2) formula to decide how much allowable enhancement expenditure has been written off.  You work through the steps in number order:

  1. What is the length of time between acquisition and disposal?
  2. Call this T(1)
  3. What is the length of time between enhancement and disposal?
  4. Call this T(2)
  5. Calculate (T(1) – T(2))
  6. What is the predictable life of the asset from the time of the acquisition?
  7. Call this L
  8. Calculate L – (T(1) – T(2))
  9. What is the allowable enhancement expenditure?
  10. Call this E(2)
  11. How much is the reduction in allowable expenditure, E(2), up to the date of disposal?
  12. Calculate E(2) x T(2)/(L – (T(1) – T(2))
  13. Call this R(2)
  14. How much enhancement expenditure is allowable in computing the gain or loss on disposal?
  15. Calculate (E(2) – R(2))

There is an example at CG76792.