Where part of a holding of land is disposed of, it is necessary to apportion the allowable cost of the land, and any other allowable expenditure, between the land sold and the land retained in order to calculate the gain or loss arising.

The statutory rules for doing this require a valuation of the land retained. In order to avoid the need for this, HMRC will usually accept an alternative basis of apportioning the expenditure.

Under the alternative basis, the land disposed of is treated as a separate asset from the land retained and any fair and reasonable method of apportioning part of the allowable expenditure to it will be accepted. HMRC may insist on the statutory rules if not satisfied that the resulting apportionments are fair and reasonable.

Small part disposals

To determine the cost of the land retained, the cost of the part disposed of is deducted from the total cost. Once the statutory rules have been applied to a part disposal of a holding of land, they also have to be applied to subsequent disposals.

Where you have disposed of part of a holding of land you may, if certain conditions are met, claim that it should not be regarded as a disposal and that the consideration you have received should instead be deducted from the allowable cost of the rest of the holding. On a later disposal, or part disposal, of the remainder of the holding, only the reduced expenditure is taken into account in calculating any subsequent gain or loss. The main conditions, which must all be met, are the:

amount or value of the disposal does not exceed 20% of the market value of the holding

amount or value of the disposal does not exceed £20,000

total amount or value of all disposals of land you have made in the year does not exceed £20,000

holding of land must not be a wasting asset (a typical example of land which is a wasting asset is a lease with 50 years or less to run)