Chargeable Gains – Companies – Further Aspects
1 Part disposals, chattels, and wasting assets
1.1 When a company disposes of a part but not all of an asset, the allowable cost of the part disposed of is computed using the same method for individuals, but in addition the allowable cost computed may then be available for indexation allowance in the normal way.
ST Ltd owned 10 hectares of land which originally cost £26,000 in March 2015. ST Ltd sold 2 hectares of the land in March 2026 for £16,000, incurring legal costs on sale of £1,000.
The remaining 8 hectares were valued at £34,000 in March 2026.
Calculate the chargeable gain on the disposal of the 2 hectares of land in March 2026.
The indexation factor from March 2015 to December 2017 is 0.082.
Show answerHide answer
1.2 A chattel disposal is also dealt with in the same way as for an individual but again with the possible availability in a normal gains calculation of indexation allowance.
1.3 A wasting asset disposed of by a company will again be dealt with as for individuals, but again indexation allowance may be available on the allowable cost.
2 Assets damaged, lost or destroyed
2.1 Damaged assets
If an asset is damaged and compensation or insurance money is received as a result, then this will normally be treated as a part disposal of the asset. The cost is calculated using the normal part disposal formula:
A |
A + B |
where:
A = value of part disposal
B = market value (MV) of the remainder at the time of part disposal
If insurance money is received then:
if the insurance money is not used in restoring the asset a normal part disposal arises, with the MV of the part retained equating to the value of the asset in its damaged condition.
if the insurance money is fully used in restoring the asset, the taxpayer can elect to have the proceeds deducted from the cost of the asset in a future calculation thereby deferring any gain when the insurance proceeds are received. The cost of the restoration would also be deductible in a future calculation as enhancement expenditure.
Ml Ltd bought a painting on 1 April 2000 for £10,000. The painting was damaged on 1 May 2025 when it was worth £50,000. After the damage it was only worth £25,000. On 1 July 2025 insurance proceeds of £30,000 were received but were not used to restore the painting.
The indexation factor from April 2000 to December 2017 is 0.635.
Calculate the chargeable gain arising on the receipt of the insurance proceeds.
Show answerHide answer
Daisy Ltd purchased a painting on 1 April 2000 for £10,000. The painting was damaged on 1 May 2025 when it was worth £50,000. After the damage it was worth £40,000.
On 1 July 2025 insurance proceeds of £8,000 were received. All of the insurance proceeds were used to restore the painting.
Assuming Daisy Ltd elects for the proceeds to be rolled over against the cost of the painting, calculate the base cost of the painting for a future disposal.
Show answerHide answer
2.2 Destroyed or lost assets
If an asset is destroyed or lost and no compensation or insurance money is received there is a disposal which will result in a capital loss.
If there is any compensation or insurance monies received this will normally be used as proceeds in an ordinary gains computation.
The date of disposal is the date the insurance money is received. If the insurance money is used to buy a replacement asset within 12 months, the gain can be deferred until the new asset is sold.
If only part of the insurance money is used to buy a replacement asset then some of the gain will be taxed immediately and some of the gain will be deferred.
SC Ltd bought an asset for £23,000 in June 2015. It was destroyed in October 2025. Insurance proceeds of £34,000 were received in March 2026. SC Ltd spent £30,000 on a replacement asset in June 2026.
Calculate the chargeable gain and the base cost of the new asset.
The indexation factor from June 2015 to December 2017 is 0.074.