AITI Chartered Tax Adviser

What is a disposal?

A capital gain is the profit that arises when you sell, or dispose of, an asset which you own. The act of selling the asset is referred to as a making a disposal.

A capital gain also arises where you sell part of an asset which you own, i.e., if you make a part-disposal.

You are also treated as making a disposal if you derive a capital sum from an asset, for example if you receive an insurance payment in compensation for the loss of an asset. A capital sum can be derived from an intangible asset or incorporeal right, for example, infringement of copyright, the right to receive a future sum, the right to sue.

An option is an intangible asset, and if you grant an option, you are regarded as disposing of a new asset (the option itself). You are also regarded as disposing of an option if you abandon the option. A quoted option is a wasting asset (as opposed to a wasting chattel – the disposal of which is generally not chargeable), whose life ends when the option term ends, or the option becomes worthless, whichever comes first.

You are also regarded as making a disposal of an asset which is entirely lost or destroyed.

The disposal of a debt does not give rise to a chargeable gain, unless it is a debt on a security, for example, a corporate bond or debenture.