CG17319 - 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.