Indexation: from 6/4/88 example: indexation allowance
This example illustrates the freezing of indexation allowance for disposals made on or after 6 April 1998, except for disposals made by companies within the charge to Corporation Tax.
In June 1987 Miss D buys an investment property for £80,000. In July 1998 she has an extension built onto the property at a cost of £20,000. Then in September 1999 she sells the property for £180,000 less costs of £2,000.
|LESS||Costs of disposal||2,000|
|LESS||Cost of acquisition||80,000|
|(Indexation allowance is calculated to April 1998)|
|LESS||Indexation||80,000 at 0.596||47,680|
|20,000 at nil||-|
There is no indexation allowance on the enhancement expenditure because it was incurred after 31 March 1998.
Additionally taper relief, see CG17895+, may be due in respect of the period of ownership from 6 April 1998 to September 1999 but the calculation is not included in this example. Any taper relief would further reduce the indexed gain.