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HMRC internal manual

Capital Gains Manual

Indexation: from 6/4/88 example: indexation factors

Various assets are sold on 15 January 1992 and the RPI for January 1992 was 135.6.

One asset was purchased on 15 January 1990 and the RPI for January 1990 was 119.5

The formula gives  (135.6-119.5)

This comes to 0.134728, which is rounded to 0.135.

Another asset was purchased on 8 December 1991.and the RPI for December 1991 was 135.7.

The RPI for the RI month is greater than that for the RD month. Therefore there is no indexation.

Another asset was purchased on 16 January 1984.and the RPI for Janaury 1984 was 342.6.

The January 1984 figure can be rebased by dividing by 3.945 to become 86.84.

The formula gives (135.6-86.84)

This comes to 0.56149 which is rounded to the nearest three decimal places which is 0.561.

Another asset was purchased on 16 January 1974.

If indexation is based on original cost rather than the 31 March 1982 value, the RPI for January 1974 is irrelevant. The RI month cannot be earlier than March 1982.

The RPI for March 1982 was 313.4, which can be rebased as 79.44.

The formula gives (135.6-79.44)

This comes to 0.706949 which is rounded to 0.707.

It is possible that dividing the old RPI may give different results, because of rounding, from multiplying the new RPI. You should accept whichever method the taxpayer prefers.