CG15725 - Compensation: wasting assets

Until the amendments introduced by FA96, s23(6) TCGA92 prevented relief under s23 TCGA92 from applying to capital sums received in respect of wasting assets where compensation was received before 6 April 1996. Wasting assets are defined by s44 TCGA92 (see CG76700).

Relief is now available in the following circumstances where the capital sum is derived from a wasting asset:

• Where s23(1) TCGA92 applies and the capital sum is wholly applied in restoring the asset (see CG15700) but not where:
  • a ‘small’ part of the capital sum is not so applied, or
  • the capital sum itself is ‘small’.
• Where either s23(4) TCGA92 (see CG15740), or s23(6) TCGA92 (CG15742), apply.

‘Small’ is covered at CG15703.

s23(8)(b) TCGA92

The cost of a wasting asset is written off over its predictable life, see CG76772. Therefore, when a capital sum is derived from a wasting asset, the deductible cost of that asset is likely to be less than its original cost. It is important to ensure that relief is not given for capital sums that exceed the deductible cost. For this reason s23(8)(b) TCGA92 provides that when relief is given under s23(1) or (3) TCGA92 for expenditure in restoring a wasting asset, the deduction is made from the wasted cost of the asset at that time and not from the original cost.