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TCGA92/S41, TCGA92/S45(3), TCGA92/S46

Miss F acquires a double cab pick-up truck for 拢26,000. A double cab pick-up truck is machinery and so it is a wasting asset under TCGA92/S44(1)(c). Suppose that the double cab pick-up truck:

• has a predictable life of 20 years,
• has a scrap value of 拢200,
• is used 90% of the time for business, and
• qualifies for capital allowances on the business part.

If the asset is sold 7 years later for 拢4,000 the computation is in two parts:

Non-business use part

The wasting asset was used for a non-business purpose for 10% of the time.

First apportion the cost (10% of 拢26,000 = 拢2,600) and the disposal proceeds (10% of 拢4,000 = 拢400).

The loss is computed as follows:

Disposal Proceeds 拢400

Less wasted cost (拢2,600)

Loss (拢2,200)

However the double cab pick-up is a chattel. TCGA92/S45(1) will apply to this portion of the calculation and the loss will be exempt (CG15445).

NOTE If the asset hadn鈥檛 been a chattel (e.g. the asset was intangible or was fixed rather than moveable) then TCGA92/S46 would have applied (see CG76775). The restricted allowable loss would have been as follows:

1. the cost to be wasted is the allowable expenditure less scrap value

拢26,000 - 拢200 = 拢25,800

1. calculate the non-business proportion of the cost to be wasted

拢25,800 x 10% = 拢2,580

1. calculate the restriction on the non-business proportion of the cost

拢2,580 x 7Yr/20yr = 拢903.

The restricted allowable expenditure, the wasted cost, is the non-business proportion of the cost less the restriction:

拢2,600 - 拢903 = 拢1,697.

The loss is then computed as follows:

Disposal Proceeds 拢400

Less wasted cost (拢1,697)

Loss (拢1,297)

Business use part

The wasting asset was used for business for 90% of the time.

First apportion the cost (90% of 拢26,000 = 拢23,400) and the disposal proceeds (90% of 拢4,000 = 拢3,600).

The disposal will result in a loss so section 41 applies to restrict the allowable expenditure by the net capital allowances that have been or may be given of 拢19,800, (see CG15410 onwards).

The loss is computed as follows:

Disposal Proceeds 拢3,600

Less wasted cost 23,400 - 19,800 (拢3,600)

Loss (0)

The total allowable loss accruing on the disposal is therefore NIL.