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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Assets held on 6/4/65: part-disposals after 5/4/65: example

  £
   
On 6 April 1960 X acquires a chargeable asset for 20000
On 6 April 1970 X disposes of an interest in it for 6000
The market value of the remainder is estimated at 24000
The market value at 31 March 1982 is 30000
On 6 April 1990 X disposes of a further interest for 40000
The market value of the remainder is estimated at 60000
On 6 April 1992 X disposes of the remainder for 80000

Assume that all these amounts are net of expenses.

Part of original cost attributed to the first part-disposal is

6000 x £20,000  = £4,000
         
6,000 + 24,000 . . . .

Therefore allowable expenditure on part retained after first part- disposal is

£20,000 - £4,000 = £16,000.

Part of this apportioned to second part-disposal is

40000 x £16,000  = £6,400
         
40,000 + 60,000 . . . .

Therefore allowable expenditure on part retained after second part-disposal is

£16,000 - £6,400 = £9,600.

Computation of entire gain on the old basis over period of ownership

. Amount realised . . 80000
         
Less Balance of cost . . 9600
. . Unindexed gain . 70400
Less Indexation . 18,000 x 0.747 13446
. . Gain . 56954

(£18,000 is the market value at 31 March 1982 of what is being sold on 6 April 1992.)

Market value at 6 April 1970 apportioned to second part-disposal.

60000 x £24,000  = £14,400
         
60,000 + 40,000 . . . .

Computation of gain from 6 April 1960 to 6 April 1970

. Market value at date of part-disposal . 14400
       
Less Cost . 9600
. . Gain 4800

Proportion of gain 6 April 1965 to 6 April 1970

5 x £4,800  = £2,400
         
10 . . . .

Balance of gain from 6 April 1970 to 6 April 1992

 equals entire gain minus gain over period to first part-disposal

 equals £56,954 minus £4,800

 equals £52,154.

The chargeable gain on the old basis

equals proportion of gain 6 April 1965 to 6 April 1970

plus balance of gain from 6 April 1970 to 6 April 1992

equals £2,400 plus £52,154

equals £54,554.

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