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HMRC internal manual

Capital Gains Manual

Introduction and computation: rebasing to 31 March 1982: capital allowances


Where capital allowances or renewals allowances have been given in respect of expenditure actually incurred by a person in providing an asset, the following Sections must be considered when that asset is disposed of.

  • TCGA92/S41 (restriction of losses by reference to capital allowances and renewals allowances: see CG15410), and
  • TCGA92/S47 (wasting assets qualifying for capital allowances: see CG15440).

For the purposes of computing the rebased gain or loss TCGA92/SCH3/PARA3 provides that any capital allowances or renewals allowances given are deemed to have been made in respect of the expenditure that is deemed to have been incurred on the reacquisition of the asset on 31 March 1982. This means that the sections operate as if the deemed expenditure was the expenditure actually incurred and in respect of which allowances were given.

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A company acquired an asset costing £14,000 on 6 April 1964.

31 March 1982 market value £20,000.

Asset sold for £10,000 on 6 March 2013.

Net capital allowances of £4,000 have been given.

The loss must be restricted to take account of capital allowances given. Paragraph 3 enables the capital allowances given to be treated as though made out of the deemed 31 March 1982 expenditure for the purposes of Section 41. Thus the loss is to be computed as follows


  Disposal proceeds   10,000
Less Cost (20,000 - 4,000)   16,000
  Unindexed loss   (6,000)
Less Indexation 16,000 x 2.131 34,096
  Loss   (40,096)


LOSS ON OLD RULES (no rebasing election - now only applicable for companies)


  Disposal proceeds 10,000
Less Cost (14,000 - 4,000) 10,000
Less Indexation 16,000 x 2.131 34,096
  Loss (34,096)
Time apportionment £34,096 x (57 11/12 / 58 11/12) (33,517)


Note: The restriction of the £20,000 March 1982 value to £16,000 in the indexation computation is provided for by TCGA92/S55 (3) (FA85/S68 (5A)).


Allowable loss (33,517)