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HMRC internal manual

Capital Gains Manual

Indexation: from 6/4/88 example: enhancement expenditure/disposal costs


  On 1 May 1985, C Ltd buys a shop as business premises 50,000
  On 1 May 1987 the back room is converted into a storeroom 17,000
  On 1 May 1989 the shop is redecorated 5,000
  On 1 June 1989 the shop is advertised for sale 1,000
  On 1 October 1989 the shop is sold and C Ltd pays solicitor’s fees 2,400

Sale proceeds were £120,000.

The costs of repainting do not qualify, even though they may have been incurred specifically for the purposes of sale, because of TCGA92/S39, see CG14306.

The costs of sale and advertising fall within TCGA92/S38 (1)(c), and therefore do not qualify for indexation. See CG17240.

  Disposal proceeds 120,000    
less Costs 50,000    
2,400 70,400      
Unindexed Gain 49,600      
less Indexation 50,000 at 0.234 11,700  
  17,000 at 0.153 2,601 14,301  
Indexed Gain 35,299      

The indexed gain may then require to be adjusted if for example C Ltd claims roll-over relief because the proceeds have been expended on other business assets.