CG15200 - Expenditure: enhancement expenditure: demolition costs
You may accept that demolition costs are permanently reflected in the state of the land by the absence of the demolished building. In practice, the sole test of allowability is whether the purpose in incurring the expenditure was to enhance the value of the asset. For example, if a building is erected in a garden and is subsequently removed and the garden reinstated, neither the cost of the building nor of its removal will normally be allowable. But where the cost of demolition is small in relation to the cost of constructing a new erection, no adjustment need be made.