Capital Allowances Act 2001 section 445

Costs of demolition

Section 445 deals with the tax treatment of demolition costs where an asset on which qualifying research and development expenditure was claimed is demolished by its owner.

• When a person demolishes an asset that represents qualifying expenditure, the disposal value they must bring into account is reduced by the demolition costs they incurred.
• If demolition costs reduce the disposal value to nil or below, no disposal value needs to be brought into account at all.
• Where demolition costs exceed the disposal value and the asset was only ever used for research and development related to the relevant trade, the excess is treated as additional qualifying expenditure.
• Demolition costs cannot also be treated as expenditure on any replacement property, preventing a double count.