Assets held on 6/4/65: alternative apportionment of overall gain: example
TCGA92/SCH2/PARA16 (5)On 6 April 1960 X opened a newsagent’s shop without taking over an existing business. On 6 April 1964 X bought a newspaper round from a competitor for £500. On 6 April 1990 X sold the whole business under a contract which allocated £20,000 (net) to goodwill (accepted as the true market value). The market value of the business at 31 March 1982 was £10,000.
It is estimated that the market value of the round bought in 1964 was £5,000 at the date of disposal and £2,500 at 31 March 1982.
The overall gain on the old rules on the disposal of goodwill is
where the indexation allowance is £10,000 x 0.575 = £5,750.
The part of the gain attributable to the newspaper round is
where the indexation allowance is £2,500 x 0.575 = £1,438.
The gain on the old basis attributable to the goodwill of the original business is, therefore,
The chargeable gain on the old basis is, therefore
The final step in the computation would be to make the comparison with the rebased gain, see CG16730+.