CG17318 - Indexation: from 6/4/88 example: indexation allowance

This example illustrates the freezing of indexation allowance for disposals made on or after 6 April 1998, except for disposals made by companies within the charge to Corporation Tax.

In June 1987 Miss D buys an investment property for £80,000. In July 1998 she has an extension built onto the property at a cost of £20,000. Then in September 1999 she sells the property for £180,000 less costs of £2,000.

-	-	Amount
-	Disposal Proceeds	180,000
LESS	Costs of disposal	2,000
-	-	178,000
LESS	Cost of acquisition	80,000
-	Enhancement expenditure	20,000
Unindexed gain	-	78,000
LESS indexation allowance to April 1998	80,000 at 0.596	47,680
Indexed gain	-	30,320

There is no indexation allowance on the enhancement expenditure because it was incurred after 31 March 1998.

Because the disposal was made before 6 April 2008,  taper relief, see CG17895+, may be due in calculating the CGT due on the gain, see CG17895+ (available from National Archives).