½Û×ÓÊÓƵ

Allowable expenditure on an asset is not restricted because capital allowances have been given on that asset unless there is a capital loss on the disposal (see below) ¹ or the asset is a wasting asset, which by definition includes plant and machinery² see C2.906. The allowable loss is restricted by excluding from the computation of the loss any expenditure to the extent to which any capital allowance has been or may be made in respect of it³. This reduces the amount of the loss or restricts the loss to nil but cannot change a loss into a gain. These rules prevent relief being given twice as capital allowances and as a capital loss.

It is important to establish that the capital allowances have been in respect of the expenditure in question. In Smallwood⁴, the taxpayer invested £10,000 in an enterprise zone property unit trust. The trustees spent the money, along with that of other investors, on land and buildings. The buildings qualified for 100% industrial buildings allowance, of which the