CGT 31 Compensation for Assets Damaged

Question 1

Compensation received when an asset is damaged represents ….

Answer 1

a part disposal of the asset

Question 2

If the asset is restored, the amount spent is treated as …..

Answer 2

enhancement expenditure on eventual disposal of the asset in the normal way

Question 3

If all the compensation is used to restore the asset……

Answer 3

a ‘rollover’ claim can be made to avoid the part disposal. The proceeds received are deducted from the base cost carried forward

Question 4

The claim is also possible if the amount of compensation retained is ……

Answer 4

small (being not more than the higher of £3,000 or 5% of the compensation received).

Question 5

If the amount of compensation retained is not small…..

Answer 5

a partial claim can be made.

Question 6

A part disposal calculation is done for the cash retained using the formula:

Answer 6

A/(A + B) × Original cost/Enhancement expenditure
A = compensation retained
B = restored value of the asset
The remainder of the compensation that was spent on restoration can be rolled over.