CG16882 - Rebasing to 31/3/82: no gain/loss disposals: examples
Example 1
A Ltd acquired an asset in 1979.
In 1983 A Ltd transferred it to B Ltd, a subsidiary of A Ltd, under ICTA70/S273 (now TCGA92/S171).
In 1985, B Ltd’s business was transferred to C Ltd in the course of a scheme of reconstruction, and the asset passed to C Ltd under ICTA70/S267 (now TCGA92/S139).
C Ltd sold the asset in July 2012.
As both ICTA70/S267 and ICTA70/S273 are specified in TCGA92/SCH3/PARA1, and as there were no other disposals of the asset between 31 March 1982 and July 2012, C Ltd is treated as having held the asset on 31 March 1982 for the purposes of rebasing (and indexation if beneficial).
Example 2
| Date | - | £ |
|---|---|---|
| 1 January 1980 | acquisition by A Ltd | 10,000 |
| 31 March 1982 | market value | 12,000 |
| 1 January 1985 | enhancement expenditure | 3,000 |
| 31 December 1985 | no gain/no loss disposal from A Ltd to B Ltd | - |
| 31 March 2013 | third party disposal by B Ltd | 50,000 |
REBASED GAIN
The enhancement expenditure incurred by A as the actual owner of the asset is treated as incurred by B where, for indexation or rebasing purposes, B is deemed to have held the asset on 31 March 1982. The rebasing calculation by reference to 31 March 1982 market value is accordingly:
| - | - | - | - | £ |
|---|---|---|---|---|
| - | Disposal proceeds | - | - | 50,000 |
| less | 31 March 1982 market value | - | 12,000 | - |
| - | Enhancement expenditure | - | 3,000 | 15,000 |
| - | - | Unindexed gain | - | 35,000 |
| less | Indexation March 1982 to March 2013 | 12,000 x 2.131 | 25,572 | - |
| - | Indexation January 1985 to March 2013 | 3,000 x 1.727 | 5,181 | 30,753 |
| - | - | Gain | - | 4,247 |
GAIN ON OLD RULES
Where a ‘kink test’ is required in the case of a disposal by a company then, for the purposes of the comparison by reference to historic cost, B takes over A’s actual cost (£10,000 plus enhancement expenditure £3,000). The indexation included in B’s allowable cost on the no gain/no loss disposal by Section 56(2) TCGA 1992 is stripped out by Section 55(6)(b), and for indexation purposes B is treated as having held the asset on 31 March 1982. The calculation by reference to historic cost is accordingly:
| - | - | - | - | £ |
|---|---|---|---|---|
| - | Disposal proceeds | - | - | 50,000 |
| less | Cost | 10,000 + 3,000 | - | 13,000 |
| - | Unindexed gain | - | - | 37,000 |
| less | Indexation March 1982 to March 2013 | 12,000 x 2.131 | 25,572 | - |
| - | Indexation January 1985 to March 2013 | 3,000 x 1.727 | 5,181 | 30,753 |
| - | - | Gain | - | 6,247 |
Note: Indexation is based on the higher of relevant allowable expenditure before 31 March 1982 and the 31 March 1982 value, see CG16732.
The chargeable gain is £4,247 (the smaller gain).