Commentary

C2.217 Expenditure qualifying for capital allowances

Capital gains tax
Capital gains tax | Commentary

C2.217 Expenditure qualifying for capital allowances

Capital gains tax | Commentary

C2.217 Expenditure qualifying for capital allowances

Although expenditure which is allowable in computing income or profits for the purposes of income tax is excluded from the computation of capital gains or losses1, there is an exception for expenditure which qualifies for capital allowances or renewals allowances2, though renewals allowances no longer apply and there is instead a deduction on replacement of domestic items (see below).

In a case where a loss arises on the disposal, the allowable loss is restricted by excluding from the computation of the loss3 any expenditure to the extent to which any capital allowance or renewals allowance has been or may be made in respect of it4. An indexation allowance cannot create or increase a loss5, so that, where allowable (see C2.301), it is ignored for the purpose of this restriction.

For the purposes of this provision 'capital allowance' does not include structures and buildings allowance but is otherwise extended to mean6:

  1.  

    (a)     any other capital allowance7

  2.  

    (b)     any deduction of capital expenditure in calculating the profits on the cash basis for small businesses (see

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