Budget 2015: Capital gains tax wasting assets

Under s 44 TCGA 1992 assets used as plant or machinery are deemed to be wasting assets. Such assets are exempt from the capital gains regime by virtue of s 45, unless the owner is able to claim capital allowances.

In the case of Executors of Lord Howard of Henderskelfe (deceased) v Revenue and Customs Commissioners [2014] EWCA Civ 278 the Court of Appeal held that even though the asset in question (a painting) was used as plant for the purposes of a trade carried on by a company, the executors, who owned the asset, were able to exempt the gain on disposal. It did not matter that the asset had never been used as plant by the owner.

Finance Bill 2015 will introduce legislation clarifying that the capital gains exemption for wasting assets only applies if the person selling the asset has used it in their own business. These changes have effect from 1 April 2015 for corporation tax on chargeable gains, and 6 April 2015 for CGT.

This change reverses the decision in the Lord Howard case, ensuring that capital gains exemption is available only on assets that are used for the purposes of a trade, profession or vocation carried on by the person making the disposal.