Damaged Assets

Question 1

Introduction

Answer 1

As the asset is damaged and not destroyed this is a partial disposal for CGT purposes

Question 2

Explain the claims available

Answer 2

The partial disposal can be deffered if the following conditions are met:

• All of the compensation received is used in the restoration of the asset
• The compensation retained is classed as small, less than or equal to 3000 or less than or equal to 5% of the total compensation received
  -The compensation received is classed as small, less than or equl to 3000 or less than or equal to 5% of the value of the asset

Question 3

Explain a partial claim

Answer 3

If the amount retained is not classed as small a partial claim can be made.
This results in the amount of compensation retained being subject to CGT

Question 4

Workings for partial claim

Answer 4

Compensation retained X
W1 Cost apportioned (X)
W2 Enhancement apportioned (X)
Gain X

W1 - cost apportioned to compensation retained
Orginal cost * compensation retained/ (compensation retained + restored value of asset)

W2 - enhancement apportioned to compensation retained
Enhancement * compensation retained/ (compensation retained + restored value of asset)

Base cost going forward

Orginal cost X
Cost used up (X)
Enhancement X
Enhancement used up (X)
Compensation deferred (X)

Enhancement = compensation defferred

Question 5

Admin for claim

Answer 5

The claim must be made not later than 4 years following the end of the tax year in which the compensation was received.

Question 6

What must you remember when calculating the base cost (especially if the full compensation has been deffered)

Answer 6

Enhancement !!