CG76791 - Wasting assets: computation: example 1 using T(1)/L

TCGA92/S46

Mr S purchases from a descendant the copyright over the memoirs of a writer 20 years after the end of the year in which the writer died. That copyright is, therefore, a wasting asset since it now has a predictable life of fifty years, see CG76723. He pays the descendant £90,000 for it but does not expect it to have any residual value in fifty years time.

He later sells after twenty years for £80,000.

Subject to any incidental expenses, his Capital Gains computation will be:

          £          
  Disposal Proceeds         80,000        
Less Acquisition cost [E(1)]         90,000        
  T(1) = 20 = 2          
  L   50   5          
                     
  [E(1)-S] = [90,000-0] = 90,000          
                     
  T(1) x [E(1)-S] = 2 x 90,000 = 36,000 54,000
  L     5            
  Gain         26,000        

NOTE. Companies and other concerns within the charge to Corporation Tax may be able to claim indexation allowance see CG17200+.