Commentary

C2.906 Assets qualifying for capital allowances

Capital gains tax
Capital gains tax | Commentary

C2.906 Assets qualifying for capital allowances

Capital gains tax | Commentary

C2.906 Assets qualifying for capital allowances

The restriction on allowable expenditure in respect of wasting assets does not apply to assets used solely for the purposes of a trade, profession or vocation, for which capital allowances have been claimed or could have been claimed1, or to expenditure which has otherwise qualified in full for any capital allowance2. Where an asset has not qualified for full capital allowances, expenditure and consideration received for disposal are apportioned, the separate parts being dealt with under the rules for wasting assets and the rules for assets which have qualified in full for capital allowances, respectively3. For these purposes, any apportionment of the expenditure and consideration for the disposal which has been made for the purposes of capital allowances is followed4.

Example 1

On 1 January 2019 E bought a wasting asset at a total cost of £5,050, including the incidental expenses of acquisition. When the asset was bought, it had a predictable life of 20 years, and an estimated scrap value of £50. E hired the asset out for several months each year, and it was agreed with HMRC that capital allowances should be granted on one-half of the total cost for the whole period of his ownership.

E sold the asset for £4,750 on 1 January 2021, the costs of disposal being £130.

There is a balancing charge, which adjusts the net capital allowances to one-half of the net loss on the asset.

The capital gains position is as follows.

Business part—

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial