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.
|less||Indexation||50,000 at 0.234||11,700|
|17,000 at 0.153||2,601||14,301|
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.