Revenue Note for Guidance
Tangible movable property (chattels) which is a wasting asset is exempt from capital gains tax, that is, no chargeable gain arises on the disposal of such property. A wasting asset is one with an expected useful life not exceeding 50 years (see section 560). Examples of wasting chattels are bloodstock, livestock, motor cars and household furniture (other than antiques) and appliances. The exemption does not apply to wasting chattels used for business purposes to the extent that the expenditure on the asset qualified for capital allowances, nor does it apply to commodities of any description.
(1) No chargeable gain accrues on the disposal of a wasting chattel (tangible moveable property which is a wasting asset). Consequently, losses incurred on the disposal of such assets are not allowable losses.
(2) The exemption does not apply where the asset has been used and used solely for the purpose of a trade or profession during the entire period of ownership of the person making the disposal and that person has claimed or could have claimed capital allowances in respect of the expenditure incurred in acquiring the asset. Likewise, the exemption does not apply where any expenditure was incurred on the asset and that expenditure qualified in full for capital allowances (for example, leased machinery or plant).
(3) A special rule applies to deal with the case where there is a disposal of a wasting chattel used partly for the purposes of a trade or profession or where the expenditure incurred in acquiring the chattel qualified in part for capital allowances. In any such case the expenditure on acquisition and the consideration for the disposal are apportioned by reference to the extent to which that expenditure qualified for capital allowances, and the gain is computed separately in relation to the apportioned parts. The part of the gain applicable to the extent that the asset has been partly used for the purposes of a trade or profession or has qualified in part for capital allowances is a chargeable gain. The part of the gain not so applicable is exempt.
(4) The exemption does not apply to a disposal of commodities by or through a market dealer.
Relevant Date: Finance Act 2020