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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Indexation: from 6/4/88 example: - postponed gain

This example illustrates the freezing of indexation allowance where there is a postponed gain. The computation is for a reorganisation involving qualifying corporate bonds (QCBs), illustrated by the examples at CG53712.

In August 1988 Mr E subscribes £10,000 for 10,000 £1 shares in unquoted company Z.

In October 1998 Z is acquired by a quoted company Y which offers one unit of loan stock nominal value £10 for each share held. The loan stock is a QCB.

In May 1999 Mr E redeems his holding of loan stock at par.

The exchange of shares for QCBs in October 1998 requires a computation under TCGA92/S116(10)(a). Shares and Assets Valuation agree the value of the shares in Z at £10 per share.

  Disposal proceeds   100,000
LESS Cost of acquisition   10,000
Unindexed gain 90,000    
(Indexation allowance is calculated to April 1998)      
LESS Indexation 10,000 at 0.507 5,070
Indexed gain 84,930    


The redemption of the loan stock in May 1999 releases a chargeable gain of £84,930 which accrues to Mr E in 1999-2000.