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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Indexation: from 6/4/88 relevant allowable expenditure

TCGA92/S53 (2)(b)

The indexation allowance is based on the amount of each item of `relevant allowable expenditure’, in the following instructions abbreviated to `RAE’.

RAE is defined by TCGA92/S53 (2)(b) as expenditure on the asset which is taken into account under TCGA92/S38 (1)(a) or (b), in arriving at the gain.

TCGA92/S38 (1)(a)

TCGA92/S38(1)(a) expenditure, see CG15161+, consists of

  • the consideration (or deemed consideration) given for the asset,
  • the incidental costs of acquiring the asset, see CG15250, and
  • if the asset was not acquired by the taxpayer, the costs of providing it. (For example if the asset is made by the taxpayer.)

Where the asset was held on 31 March 1982 indexation may be based on the market value on that date, see CG17405.

TCGA92/S38 (1)(b)

TCGA92/S38(1)(b) expenditure consists of

  • expenditure on enhancing the asset, see CG15180, and
  • expenditure on establishing, preserving or defending title.

TCGA92/S38 (1)(c)

Expenditure falling within TCGA92/S38(1)(c), incidental costs of disposal, does not qualify for indexation allowance, even if exceptionally it was incurred some time before the date of sale.

The example in CG17312 illustrates these principles.

Date of Expenditure

The amount of indexation depends upon the date of the expenditure, see CG17251. The amount of each item of RAE and the date of expenditure will normally be available in the taxpayer’s file, accounts or return form. Details of dates and expenditure provided in computations by agents may be accepted for indexation purposes, unless there appear to be serious discrepancies in the information available.