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In computing gains or losses, the person making the disposal may deduct the amount of any expenditure wholly and exclusively incurred on the asset by them or on their behalf for the purpose of enhancing the value of the asset, provided the expenditure is reflected in the state or nature of the asset at the time of the disposal¹. Although not specifically mentioned in the legislation, HMRC accept that enhancement expenditure may be incurred in money's worth².

No deduction may be made for the estimated value of the taxpayer's personal labour and skill in carrying out work which enhances the value of the asset³.

Relevant cases on the meaning of wholly and exclusively can be found in C2.202. One specific case which looked at wholly and exclusively in respect of enhancement expenditure was K Mulloy⁴, where the taxpayer had sold his business and the First-tier Tribunal found that the expenditure he had incurred (for instance in training himself) had not been incurred 'wholly and exclusively' in improving