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TCGA92/S41(2) - example

Mr R acquires a tower crane for £200,000 on 6 April 2007.

»Ê¹ÚÌåÓýapp tower crane is disposed of for £50,000 on 5 April 2014.

Capital allowances of £165,000 were given. »Ê¹ÚÌåÓýapp capital allowances written down value was £35,000 at disposal so there was a balancing charge on disposal of £15,000.

Under TCGA92/S41(7), the capital allowances are treated as the difference between the expenditure incurred on the tower crane and the disposal value:

Capital allowances made - £200,000 - £50,000 = £150,000.

Section 41(2) restricts the loss by reducing the allowable expenditure:

Disposal Proceeds £50,000

Less cost 200,000-150,000 £50,000

Loss (0)

»Ê¹ÚÌåÓýapp person making the disposal received total capital allowances of £150,000 and an allowable loss of £0, giving total relief of £150,000. »Ê¹ÚÌåÓýapp asset reduced in value by £150,000 during the period of ownership. »Ê¹ÚÌåÓýapp person making the disposal receives relief under the capital allowances code equal to the reduction in value of the asset.

Without section 41, the computation would be as follows:

Disposal Proceeds £50,000

Less cost 200,000-150,000 (£200,000)

Loss (150,000)

»Ê¹ÚÌåÓýapp person making the disposal would receive capital allowances of £150,000 and an allowable loss of £150,000, giving total relief of £300,000. »Ê¹ÚÌåÓýapp asset reduced in value by £150,000 during the period of ownership. »Ê¹ÚÌåÓýapp person making the disposal would receive relief twice for the reduction in the value of the asset.