CG76791 - Wasting assets: computation: Example 1 using T(1)/L
Mr S purchases the copyright over the memoirs of a writer at the
end of the year in which he died. That copyright is, therefore, a
wasting asset since it now has a predictable life of fifty years,
see CG76723. He pays the executors £90,000 for it but does not
expect it to have any residual value in fifty years time.
He later sells after twenty years for £80,000.
Subject to any incidental expenses, his Capital Gains
computation will be:
| £ | ||||||||||
| Disposal proceeds | 80,000 | |||||||||
| LESS | Acquisition cost [E(1)] | 90,000 | ||||||||
| T(1) | 20 | 2 | ||||||||
| L | 50 | = | 5 | |||||||
| [E(1)-S] [90,000-0] | = | 90,000 | ||||||||
| T(1) | x | [E(1)-S] | = | 2 | x | 90,000 | = | 36,000 | 54,000 | |
| L | 5 | 26,000 | ||||||||
| LESS | Indexation (say) | 0.25 | x | 54,000 | = | 13,500 | ||||
|
Gain | 12,500 | |||||||||
NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.
