Taxation (UK) · Chargeable gains for companies

Chargeable Gains: Part Disposals and Chattels for Companies

Updated 11 October 2026 · Fact-checked

A part disposal lets you deduct only part of the original cost: cost × A ÷ (A + B), where A is the proceeds and B is the market value of the part kept. Chattels are tangible movable assets. Sales at £6,000 or less are exempt, and larger gains are capped at 5/3 of the excess over £6,000.

Understand Chargeable Gains: Part Disposals and Chattels

A company often sells only part of an asset, such as a piece of a larger plot of land. You cannot deduct all the original cost, because you still own the rest. The part-disposal rule splits the cost fairly between the part sold and the part kept, using their values.

The split uses A and B. A is the gross proceeds of the part sold. B is the market value, at the date of sale, of the part you keep. The cost deducted is the total cost × A ÷ (A + B). The balance of the cost carries forward for the part retained.

A chattel is tangible movable property, such as a painting or an antique table. Chattels get special treatment so that small disposals do not create tax work. A gain is exempt where the proceeds are £6,000 or less. The cost does not affect this exemption.

If proceeds are over £6,000 and there is a gain, the gain is limited to 5/3 × (proceeds − £6,000). This is marginal relief. You take the lower of that figure and the normal gain. If proceeds are under £6,000 and cost was more than £6,000, you use deemed proceeds of £6,000 to work out the loss.

A wasting chattel is a tangible movable asset with a predictable expected life of 50 years or less, such as a boat with a 25-year life. It is exempt from gains and losses, so the £6,000 rules above do not apply to it. The exception is an asset that qualifies for capital allowances, such as plant used in the business. A boat with a life of more than 50 years would be an ordinary chattel. Companies pay corporation tax on gains within taxable total profits and have no annual exempt amount. Indexation allowance for companies is calculated only up to December 2017, and only for assets the company held at that date. An asset acquired after December 2017 gets no indexation allowance. Check the acquisition date.

Key rules to remember

Part disposal cost: Allowable cost = Total cost × A ÷ (A + B); A = proceeds of the part sold. B = market value of the part retained at the date of sale. Use gross proceeds for A.
Chattel gain exemption: Proceeds ≤ £6,000: gain is exempt; Applies to non-wasting chattels. The cost does not affect the gain exemption. A loss is still allowable, subject to the deemed proceeds rule below.
Chattel marginal relief: Maximum gain = 5/3 × (Proceeds − £6,000); Where proceeds exceed £6,000 and there is a gain, the gain is the lower of this and the normal gain.
Chattel loss restriction: Where proceeds < £6,000 and cost > £6,000, use deemed proceeds = £6,000; The allowable loss is cost less £6,000, after any selling costs.
Wasting chattel: Expected life ≤ 50 years: exempt; Not exempt if the asset qualifies for capital allowances.
Cost carried forward: Cost of part retained = Total cost − cost used in the part disposal; Use this when the retained part is sold later.

How to solve Chargeable Gains: Part Disposals and Chattels questions

Identify first whether the question is about land or shares in parts, or about a chattel. Then apply the matching rule in order.

1Decide the type of asset. Land sold in part means a part disposal. A tangible movable item means a chattel. Check the life of the asset for the wasting chattel rule.
2For a part disposal, write down A (proceeds of the part sold) and B (market value of the part kept).
3Calculate the allowable cost: total cost × A ÷ (A + B). Deduct the incidental selling costs separately.
4Compute the gain: proceeds − selling costs − apportioned cost.
5For a chattel, test the proceeds against £6,000. If proceeds are £6,000 or less, any gain is exempt whatever the cost. If cost is above £6,000, use deemed proceeds of £6,000 to find the loss.
6If there is a gain on proceeds above £6,000, calculate 5/3 × (proceeds − £6,000). Take the lower of that and the normal gain.
7If there is a loss and proceeds are below £6,000, replace the proceeds with £6,000 to find the allowable loss.
8Add any chargeable gain to taxable total profits. Show the remaining cost for a retained part.

Quickest way: Fast routine for part disposals and chattels

When to use it: Use this for any objective test question or a short part of a constructed response question.

Part disposal: write A and B first, then cost × A ÷ (A + B). The fraction is A over the total, so check it is less than 1.
Chattel: compare the proceeds with £6,000 first. If proceeds are £6,000 or less, any gain is exempt. Then check whether cost is above £6,000, which restricts a loss.
Gain over £6,000: work out 5/3 × (proceeds − £6,000) in your head and compare it with the normal gain. Choose the smaller.
Loss: if proceeds are under £6,000 and cost is over £6,000, use deemed proceeds of £6,000. The loss is cost less £6,000.
Check for a wasting chattel with a life of 50 years or less. If there are no capital allowances, the answer is exempt.

Common mistakes in Chargeable Gains: Part Disposals and Chattels

Using the market value of the part sold as B, or the total value as B
The letters A and B are easy to mix up under pressure.
Fix: A is what you sold. B is what you kept. The denominator A + B is the value of the whole asset before sale.
Deducting the whole cost on a part disposal
Students treat the sale as a full disposal.
Fix: Always apportion. Only the part of the cost matching the part sold is deducted. The rest carries forward.
Ignoring marginal relief and charging the full gain on a chattel sold for more than £6,000
Students remember the £6,000 exemption but forget the cap.
Fix: Always compute 5/3 × (proceeds − £6,000) and take the lower figure.
Allowing the full loss on a chattel bought for more than £6,000 and sold for less
Students apply the loss rule like any other asset.
Fix: Use deemed proceeds of £6,000 in the loss calculation.
Treating a wasting chattel as chargeable when it qualifies for capital allowances, or as exempt when it does
Students learn the exemption but miss its exception.
Fix: Check whether the asset is plant on which capital allowances are available. If so, the wasting chattel exemption does not apply.
Applying the personal annual exempt amount to a company gain
Students mix the individual and company rules.
Fix: A company has no annual exempt amount. The gain goes into taxable total profits and is taxed at corporation tax rates.

Worked examples

Example 1

Z Ltd bought a plot of land for £200,000 in June 2019. In January 2026 it sold part for £150,000, incurring legal fees of £3,000. The market value of the remaining land was £450,000. Calculate the chargeable gain.

Show the solution

A = £150,000. B = £450,000. A + B = £600,000.
Apportioned cost = £200,000 × 150,000 ÷ 600,000 = £50,000.
Net proceeds = £150,000 − £3,000 = £147,000.
Gain = £147,000 − £50,000 = £97,000. There is no indexation because the land was bought after December 2017.
Cost carried forward for the retained land = £200,000 − £50,000 = £150,000.

Answer: The chargeable gain is £97,000, included in taxable total profits. £150,000 of cost carries forward.

Example 2

Y Ltd sold three chattels, none of which qualified for capital allowances. (a) A painting bought for £2,400 and sold for £9,000. (b) An antique table bought for £8,000 and sold for £5,000. (c) A motor boat with a 25-year life, bought for £8,000 and sold for £20,000. Ignore selling costs. State the gain or loss on each.

Show the solution

(a) Normal gain = £9,000 − £2,400 = £6,600.
(a) Marginal relief limit = 5/3 × (£9,000 − £6,000) = 5/3 × £3,000 = £5,000.
(a) Gain = lower of £6,600 and £5,000 = £5,000.
(b) The table is not a wasting chattel. Cost is above £6,000 and proceeds are below £6,000, so use deemed proceeds of £6,000.
(b) Loss = £8,000 − £6,000 = £2,000.
(c) The boat is a wasting chattel with a life of 50 years or less and does not qualify for capital allowances, so it is exempt.

Answer: (a) Gain £5,000. (b) Allowable loss £2,000. (c) Exempt, so no gain and no loss.

Exam tips

In objective test questions, the trap is usually the £6,000 limit. Check the proceeds against £6,000 for the gain exemption and marginal relief, and check the cost against £6,000 for a loss.
Write A and B on your rough paper at the start of a part disposal question. This avoids using the wrong value in the formula.
Show the cost carried forward in a constructed response answer. Markers often look for it.
For marginal relief, always show both figures: the normal gain and 5/3 × excess. State which is lower.
Read the scenario for the asset's expected life and any capital allowances claim. That decides wasting chattel status.

Practice questions from Chargeable gains for companies

Chargeable Gains: Part Disposals and Chattels in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Chargeable Gains: Part Disposals and Chattels: frequently asked questions

What is the part disposal formula in TX-UK?

The allowable cost is total cost × A ÷ (A + B). A is the proceeds of the part sold and B is the market value of the part kept at the date of sale. The remaining cost is carried forward for the retained part.

How does chattels marginal relief work?

When proceeds are above £6,000 and there is a gain, the gain cannot exceed 5/3 × (proceeds − £6,000). You compute the normal gain as well and take the lower of the two figures.

Are wasting chattels always exempt?

No. A wasting chattel has an expected life of 50 years or less and is normally exempt. It is not exempt if it qualifies for capital allowances, for example plant used in a business.

Does a company get the £3,000 annual exempt amount?

No. The annual exempt amount is for individuals. A company's chargeable gains are included in its taxable total profits and taxed at corporation tax rates.