CG15453 | Capital allowances: wasting assets qualifying in part for: example
From HM Revenue & Customs · Capital Gains Manual
A wasting asset is purchased for £26,000. Suppose the asset
has a predictable life of 21 years,
has a scrap value of £1,000,
is used 40% of the time for business, and
qualifies for capital allowances on the business part.
If the asset is sold 7 years later in 1992 for £10,000 the computation is in two parts
NON-BUSINESS USE: This is the disposal of a wasting asset costing £15,600 (60% of £26,000) for £6,000 (60% of £10,000). The wasting asset restriction is, see CG76700+
60% of (£26,000 - £1,000) = £15,000 x 5Yr/21yr = £5,000,
so the restricted allowable expenditure, the wasted cost, is
£15,600 - £5,000 = £10,600.
The loss is computed as follows
| £ | |||
|---|---|---|---|
| Disposal proceeds | 6000 | ||
| Less | Wasted cost | 10600 | |
| Unindexed loss | (4600) | ||
| Less | Indexation (say) | 10,600 x 0.3 | 3180 |
| Loss | (7780) |
BUSINESS USE: This is the disposal of a non-wasting asset costing £10,400 (40% of £26,000) for £4,000 (40% of £10,000). The disposal is at a loss so the allowable expenditure is restricted by the net capital allowances given £6,400, see CG15410+
The loss is computed as follows
| £ | ||||
|---|---|---|---|---|
| Disposal proceeds | 4000 | |||
| Less | Cost | 10400 | ||
| less Section 41 restriction | 6400 | 4000 | ||
| Unindexed loss | 0 | |||
| Less | Indexation (say) | 4,000 x 0.3 | 1200 | |
| Loss | (1200) |
The allowable loss accruing on the disposal is therefore
£7,780 + £1,200 = £8,980