Lost, destroyed or damaged assets

In this lesson

1. 0:00 Lost, destroyed or damaged assets overview
2. 0:15 Uninsured asset disposal and capital loss
3. 0:25 Insured assets and reinvestment options
4. 1:13 Worked example: Antique vase rollover relief
5. 3:21 Damaged assets and part disposal calculation
6. 4:04 Insurance proceeds deduction election

About this lesson

You'll discover why these events count as deemed disposals, how insurance proceeds affect the tax treatment, and crucially, how to use rollover relief elections to defer gains when reinvesting in replacement assets. Through a worked example involving an antique vase, you'll see step-by-step how to adjust the base cost of a replacement asset to track deferred gains, ensuring you handle these scenarios correctly in your exams and practice. The lesson covers two main situations. First, when an asset is lost or destroyed: if uninsured, you calculate a capital loss on nil proceeds; if insured, the tax depends on whether you reinvest the proceeds. If you reinvest fully within 12 months, you can elect to roll over the gain into the replacement asset's base cost, deferring the tax charge. If you only partly reinvest, you'll have an immediate gain on the uninvested amount, with any remaining gain also rolled over. Second, when an asset is damaged: similar rules apply, with part disposal calculations used when proceeds aren't fully reinvested in repairs. The worked example walks you through a practical scenario where Johnson's £66,000 vase is destroyed, insurance pays £93,000, and he buys a replacement for £100,000. You'll see how the £27,000 gain is deferred by reducing the replacement vase's base cost to £73,000, ensuring the deferred gain is captured when he eventually sells the second asset. This technique is essential for ATX and other advanced taxation modules where asset disposals feature regularly in exam questions.

Duration: 4m