CG15453 - Capital allowances: wasting assets qualifying in part for: example
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 |
| 6,000 |
| Less | Wasted cost |
| 10,600 |
|
|
| Unindexed loss | (4,600) |
| Less | Indexation (say) | 10,600 x 0.3 | 3,180 |
|
|
| Loss | (7,780) |
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 |
|
| 4,000 |
| Less | Cost |
| 10,400 |
|
|
| less Section 41 restriction |
| 6,400 | 4,000 |
|
|
| Unindexed loss |
| 0 |
| Less | Indexation (say) | 4,000 x 0.3 |
| 1,200 |
|
|
| Loss |
| (1,200) |
The allowable loss accruing on the disposal is therefore
£7,780 + £1,200 = £8,980
