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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Rebasing following part-disposal

TCGA92/SCH3/PARA4 (1)

Where there is a part disposal TCGA92/S42 provides for the allowable expenditure to be apportioned.

The fraction attributable to the property which remains undisposed of is: -

\_\_B\_\_

 A + B

where A is the consideration received on the part-disposal and B the value of the part retained at that time, see CG12731+.

For the purpose of computing the rebased gain or loss TCGA92/SCH3/PARA4 (1) provides that where there has been a part- disposal of an asset

  • after 31 March 1982, and
  • before 6 April 1988

the allowable expenditure remaining after the part-disposal is to be recomputed by reference to the 31 March 1982 value rather than cost. In other words the above fraction is to be applied to the 31 March 1982 value so as to give the benefit of rebasing on the disposal of the part retained.

Example

A parcel of land costs £10,000 in 1980. Its market value on 31 March 1982 is £12,000.

In 1985 part is sold for £8,000.

The value of the remaining land is £7,000 and this is sold in 2013.

In 1985 the allowable expenditure, in accordance with CGTA79/S35, would have been

£10,000 x             _\_\\_\_£8,000\_\___               =             £5,333

                                          £8,000 + £7,000

leaving a cost to carry forward of

£10,000 - £5,333 = £4,667.

This is the cost of the part remaining and it is used in the computation of the gain on the old rules when the remainder is sold.

On the disposal of the remainder in 2013, TCGA92/SCH3/PARA4 applies, so that the expenditure available to be taken into account in the rebasing computation is

£12,000 x             _\_\\_\_£7,000\_\___               =             £5,600

                                           £8,000 + £7,000