CIRD20220 - Reinvestment relief: computation: old asset chargeable intangible asset: complete realisation of asset: proceeds not fully reinvested
CTA09/S758(3)
Where the net proceeds on the complete realisation of the old asset are more than the expenditure on replacement assets the amount available for relief is limited to the excess of that expenditure over the cost recognised for tax purposes of the old asset. (See CIRD20210 for the meaning of these terms).
Example
Assume the facts are as in the example in CIRD20210 (repeated below for convenience) except that the expenditure on replacement assets is reduced.
As before the asset is purchased for 拢100 and sold for 拢120 (net of incidental costs) when its tax value (and value in the accounts) is 拢30. There is still a realisation credit under CTA09/PART8 (see CIRD13250) of 拢90 (realisation proceeds 拢120 - tax written down value 拢30). But this time expenditure on replacement assets is 拢110.
The relief is therefore the amount by which the expenditure (拢110) exceeds the cost for tax of the old asset (拢100), that is 拢10. If the expenditure on the new assets had not exceeded 拢100 there would have been no amount available for relief.