Part disposals

By Tolley in association with Jackie Barker of Wells Associates
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The following Corporation Tax guidance note by Tolley in association with Jackie Barker of Wells Associates provides comprehensive and up to date tax information covering:

  • Part disposals
  • Part disposal formula
  • Part disposals of land
  • Leases

This note explains the general rules surrounding the part disposal of company assets and provides examples of computations of part disposals. For an overview of the general position regarding company disposals, see the Corporate chargeable gains guidance note.

The disposal of part of an asset is a chargeable disposal for tax purposes. Examples of part disposals might include selling two acres out of a five-acre plot, or the grant of a right or interest separated from other rights in an asset, such as the grant of a lease out of a freehold.

TCGA 1992, s 21(2)

In order to calculate the chargeable gain or allowable loss, it is necessary to apportion the cost value between the part disposed of and the part retained (where appropriate, the 31 March 1982 value should be used; see the Indexation allowance and rebasing guidance note). Any expenditure which relates to the asset as a whole must also be apportioned. Expenditure that can be attributed wholly to the part disposed of may be deducted in full.

TCGA 1992, s 42
Part disposal formula

The formula which should be used to apportion the allowable expenditure is as follows:

A/(A + B)

A = gross disposal proceeds

B = market value of the part retained at the date of disposal

The resulting figure should be applied to the original cost and to any other allowable expenditure common to the asset as a whole.

The allowable cost to be deducted on a future disposal is the original cost less the amount taken into account for the part disposal.

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