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Capital Gains Manual

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HM Revenue & Customs
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Assets held on 6/4/65: relevant date: example

TCGA92/SCH2/PARA16 (4)

An asset was acquired on 6 January 1954 for £12,000 and disposed of on 6 July 1993 for £100,000. Additional expenditure was incurred during the period of ownership, £5,000 in 1960 and £8,000 in 1964. No rebasing election has been made. The market value of the asset at 31 March 1982 was £20,000.

GAIN ON OLD RULES

        £
         
  Disposal proceeds (6 July 1993)     100,000
Less Cost (6 January 1954)   12,000  
  Enhancement expenditure (6 January 1960)   5,000  
  Enhancement expenditure (6 January 1964)   8,000 25,000 
    Unindexed gain   75,000
Less Indexation 25,000 x 0.771   19,275
  Gain before time-apportionment     55,725

NOTE: If the market value at 31 March 1982 was £50,000 (that is, greater than the allowable expenditure up to 31 March 1982 - which is £25,000 in this case) the Indexation would be, see CG17405+,

£50,000 x 0.771 = £38,550.

ATTRIBUTION OF GAIN TO PARTICULAR EXPENDITURE

Item 0:                 £55,725 x             \_£12,000\_           =             £26,748

                                                                       £25,000

Item 1:                 £55,725 x             \_£5,000\__           =             £11,145

                                                                       £25,000

Item 2:                 £55,725 x             \_£8,000\__           =             £17,832

                                                                       £25,000

                                                                                                                        £55,725

COMPUTATION OF CHARGEABLE GAIN ON OLD BASIS

Each part of the gain corresponding to relevant expenditure is then apportioned again by reference to a fraction of which

  • the numerator is the period between the 6 April 1965 and the date of disposal, and
  • the denominator is the period between the date of the relevant expenditure and the date of disposal.

£26,748 x             \_\\_\_£339\_\__        +             £11,145 x             \_\\_\_£339\_\__        +             £17,832 x               \_\\_\_£339\_\__

                                              £135 + £339                                             £63 + £339                                                       £15 + £339

                              =               £19,130             +                                   £9,398                +                                           £17,076

                              =               £45,604

The final step in the computation would be to make the comparison with the rebased gain, see CG16730+.

NOTE: TCGA92/SCH2/PARA16 (4) expresses the computation as a formula. the application of that formula to the above example is as follows.

Chargeable gain  =  {E(0)   \_\\_\_T\_\__     +     E(1)        \_\\_\_T\_\__          +    E(2)        \_\\_\_T\_\__  }  x gain

                                                       P + T                                     P(1) + T                                 P(2) + T

 

 
 

Where

T = 6 April 1965 to 6 July 1993 = 339 months
     
P = 6 January 1954 to 5 April 1965 = 135 months
P1 = 6 January 1960 to 5 April 1965 = 63 months
P2 = 6 January 1964 to 5 April 1965 = 15 months
E(0) = 26,748/55,725  
E(1) = 11,145/55,725  
E(2) = 17,832/55,725  
and E(O) + E(1) + E(2) = 1