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I think there is an error in the last lecture of the 12th chapter, and in the notes of open tuition. Anywhere and everywhere I have read, plant and machinery are always treated as ‘Wasting chattels’, and NOT ‘non-wasting chattels’. And, a gain or loss on a disposal of a wasting chattel is exempt from capital gains tax UNLESS capital allowances have or could have been claimed on the asset. And this makes more sense, than treating plant and machinery as non-wasting chattels. Someone from open tuition please clarify.
You are right. And wrong – some capital allowances are wasting ans some are non-wasting – it depends.
So to clarifyFor the exam in a capital allowances computation – just treat as wasting and add to computation –
Wasting chatels will be obvious and treat as chattels with those rules. If you have claimed capital allowances on an asset then there is no CGT as the sale of the asset is dealt with in the CA computation.Do not think too deeply at this level – you wil never have to decide which time of asset it is.
Thank you for the prompt reply.
Again, you have stated, “If you have claimed capital allowances on an asset then there is no CGT as the sale of the asset is dealt with in the CA computation.”
But, the rule is wasting chattels are exempt from CGT (unless they are plant and machinery for which capital allowances have been claimed). So plant and machinery for which cap allowances have been claimed, qualify for CGT, UNLESS, it’s a loss, because if it’s a loss, the capital allowances would have already given tax relief for the expenditure, and hence a capital loss is not allowable.
Please verify that whatever I have written above is correct.
You are getting all the rules mixed up.
Ok step back and breathIn the exam capital allowances will be asked in an obvious manner and you will not have to decide if its a chattel or not – just deduct it from the CA comp.
If the question is capital gains – and it will be obvious, then deal with each asset individually and if in doubt write out the rule that you are assuming is being asked about.
They are not – I repeat – NOT – going to start asking you questions about this in this depth.
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