CG76780 - Wasting assets: computation: using the T(2) formula
TCGA92/S46
This instruction shows you how to use the T(2) formula to decide how much allowable enhancement expenditure has been written off. You work through the steps in number order:
- What is the length of time between acquisition and disposal?
- Call this T(1)
- What is the length of time between enhancement and disposal?
- Call this T(2)
- Calculate (T(1) – T(2))
- What is the predictable life of the asset from the time of the acquisition?
- Call this L
- Calculate L – (T(1) – T(2))
- What is the allowable enhancement expenditure?
- Call this E(2)
- How much is the reduction in allowable expenditure, E(2), up to the date of disposal?
- Calculate E(2) x T(2)/(L – (T(1) – T(2))
- Call this R(2)
- How much enhancement expenditure is allowable in computing the gain or loss on disposal?
- Calculate (E(2) – R(2))
There is an example at CG76792.