Taxation of Chargeable Gains Act 1992 section 46

Straight-line restriction of allowable expenditure

Section 46 deals with how allowable expenditure is restricted on a straight-line basis when computing the chargeable gain on disposal of a wasting asset.

• When a wasting asset is disposed of, the original acquisition cost (less any residual or scrap value) is deemed to be written off evenly on a daily basis over the asset's predictable life, reducing the amount that can be deducted in the gain computation.
• Any enhancement expenditure that improves the asset is similarly written off on a straight-line daily basis, but starting from the date the improvement is first reflected in the asset's condition, rather than from the date of acquisition.
• The fraction of acquisition cost excluded from the gain computation is T(1) divided by L, applied to the cost minus any scrap value, where L is the asset's predictable life and T(1) is the period from acquisition to disposal. For enhancement expenditure, the excluded fraction is T(2) divided by (L minus T(1) minus T(2)), where T(2) is the period from when the enhancement is first reflected in the asset to the date of disposal.
• Where enhancement expenditure creates or increases the residual or scrap value of the asset, the straight-line write-off of the original acquisition cost must be adjusted to take that revised scrap value into account.