CG12735 - Part disposals: no gain/no loss disposals

S42(5) makes it clear that the provisions for the apportionment of cost on a part disposal are to be operated before the various provisions which secure that, in certain circumstances, neither a gain nor a loss is deemed to have arisen on a disposal, see CG14500 .

Example

X and Y are spouses, or civil partners, or members of a group of companies. X has an asset which cost £40,000 and transfers part of the asset to Y. At the time of the transfer, the market value of the part transferred was £30,000. The market value of the part retained was £20,000.

The part disposal rules are applied on the basis that the part of the asset transferred to Y was disposed of at market value. The part of the cost apportioned to the disposal is

£40,000 x (£30,000 / £30,000 + £20,000)) = £24,000

For the purposes of any later disposal by X the adjusted cost of the remainder of the asset is

£40,000 - £24,000 = £16,000.

Y has an acquisition cost of £24,000 in respect of the part of the asset transferred to them.