CG76792 - Wasting assets: computation: Example 2: using T(2)/L
In this example, the basic facts are the same but after five years, Mr S has to take action to prevent a breach of his copyright. This costs him £10,000 in allowable expenditure on legal fees. The computation now becomes:
| £ | |||||||||
| Disposal proceeds | 80,000 | ||||||||
| LESS | Acquisition cost [E(1)] | 90,000 | |||||||
| Reduction as CG76791 | 36,000 | ||||||||
| Allowable cost | 54,000 | ||||||||
| Legal expenses [E(2)] | 10,000 | ||||||||
| T(1 )- T(2) 20 | - | 15 | = | 5 | |||||
| L - [T(1) | - | T(2)] 50(5 | = | 45 | |||||
| [E(2)] | x | T(2) 10,000 | x | 15 | = | 3,333 | |||
| L([T(1)(T(2)] | 45 | ||||||||
| Allowable expenditure | 6,667 | 60,667 | |||||||
| 19,333 | |||||||||
| LESS | Indexation on acquisition cost | 13,500 | |||||||
| Indexation on legal fees (say) | 0.10 | x | 6,667 | 667 | |||||
|
Gain | 5,166 | ||||||||
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+.
