CG13137 - occasions of charge: assets lost/destroyed/negligible value: Buildings and Structures

Under s24(1) TCGA92, where an asset has been entirely ‘lost or destroyed’, then that is treated as a deemed disposal of the asset (see CG13120).

Under s24(2) TCGA92, where the value of an asset has become ‘negligible’, then that is treated as a deemed disposal of the asset (see CG13120+).

Where there are buildings or structures on land, under general law, the asset is actually the underlying land itself. As this land can never be entirely destroyed and is unlikely to become of negligible value, the building or structure would be outside s24(1) or (2) TCGA92.

To overcome this, s24(3) TCGA92 allows the owner to treat a building or structure as an asset which is separate and distinct from the underlying land on which it stands, thus allowing claims under either s24(1) or (2) TCGA92. S24(3) TCGA92 does not apply automatically. Instead, it is necessary for the owner to tell HMRC, in writing, that they want s24(3) TCGA92 to apply.

When there is a deemed disposal of a building or structure under either s24(1) or (2) TCGA92, the claimant is also treated as though they disposed of and immediately reacquired the site, see CG15773, of the building or structure. Under s272 TCGA92, this deemed disposal and reacquisition are treated as taking place at the market value of the site at the date of the s24(1) or (2) TCGA92 deemed disposal.

As a result, when a claim is made under s24(1) or (2) TCGA92, the loss on the deemed disposal of the building or structure will reflect both the fall in value of the building or structure and the change in value of the underlying land. If the value of the land has increased, then there will be a gain on its deemed disposal which will reduce the amount of the loss on the deemed disposal of the building or structure. Private residence relief may be available if the relevant conditions are met (CG64200C).