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In other articles we have seen that when a disposal event occurs, taxpayers are subjected to a balancing charge or allowed a balancing allowance. A balancing charge involves charging back excessive capital allowances claimed and balancing allowance provides relief for claims that are short.

Capital allowances are considered excessive when the disposal value is more than the notional written down value after deducting the writing down allowances from the original cost. If the disposal value is less than the notional written down value, capital allowance claims are treated as inadequate and the shortage is made up through a balancing allowance.

The issue of disposal even becomes relevant in the above context. Disposal events are not confined to sale of an asset. Instead, all the following events are disposal events:
• The taxpayer ceases to own the asset
• Possession of the asset by the taxpayer is lost permanently
• Abandonment of an asset used for mineral exploration and access at the site where it was so used
• The asset ceases to exist
• The asset begins to be used for a purpose other than the qualifying activity
• The qualifying activity itself is discontinued permanently
• The asset is leased under a long funding lease

When a disposal event takes place, the taxpayer is required to bring a disposal value into account. The rules regarding computation of disposal value is somewhat complex; it might not be even the sale value if the sale event is considered a tax avoidance measure.

It is possible that an asset might have more than one disposal event. In such cases, disposal value needs to be brought into account only on the happening of the first event.

It is to be noted that except in the case of single asset pools, the above provisions apply to the pool total as a whole and not to individual assets.

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