I have a client who has recently sold a holiday lodge they have owned for 13 years. They have only ever used the lodge as a holdiay home for themselves and never rented it out. It was never elected as their PPR.
They paid £100,000 for this and have sold it for £80,000 less a commission of £10,000 giving net proceeds of £70,000.
They had a licence/agreeement to use the lodge for 40 years.
My view is that tis is a wasting asset and so when calculating the capital loss arising I need to reduce the base cost of the lodge to reflect the diminution in value over the life of the asset.
My calculation would be £100,000 x 27/40 = £67,500 = base cost. Therefore gain, before AE, would be £2,500.
Do members agree with my logic or have I missed something.