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In computing a capital gain on the disposal of an asset, allowable costs include the amount or value of the consideration, in money or money's worth, given by the owner (or on their behalf) wholly and exclusively for the acquisition or provision of the asset. This includes incidental costs of the acquisition (see C2.208)¹.

The expenditure must be incurred on the acquisition or provision of the asset. In Pounds², consideration was received for the grant of an option to purchase land. Completion depended on obtaining the release of two restrictive covenants which cost the vendors £90,000; they claimed this as an allowable deduction, but the House of Lords held that the release of the covenants was not undertaken to provide the option but was part of it and the cost was not allowable. For more details of the Pounds case see C2.106.

Assets which are provided rather than acquired would include goodwill of a business commenced by the owner of the asset; patents registered by the inventor of the device