Taxation (International and Other Provisions) Act 2010 section 419

The capital (disposals) adjustment

Section 419 explains how to calculate the capital disposals adjustment, which is used when working out a group's aggregate EBITDA under section 416, and which effectively strips out gains and losses on disposals of capital assets from the group's profit before tax.

• The capital disposals adjustment adds back losses on capital asset disposals, deducts profits on capital asset disposals, and then adds back any recalculated profit amounts arising where the disposal proceeds exceed the original capital cost.
• A recalculated profit amount arises where a profit or loss on a capital asset disposal is recognised in the group's profit before tax and the capital proceeds from the disposal exceed the original capital expenditure on the asset.
• When determining the original capital cost of an asset, any adjustments (such as impairments or revaluations) that have already been recognised as profit or loss items in the group's accounts for the current or earlier periods must be ignored — effectively reverting to the original capital expenditure figure.
• The rules apply to disposals of whole or part assets, but only where the profit or loss on the disposal is capital in nature; disposals giving rise to revenue profits or losses are excluded, including disposals where no gain or loss arises.

---