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HMRC internal manual

Capital Gains Manual

Indexation: from 6/4/88: small part-disposals


There are a number of situations in which a small capital receipt is not treated as a part-disposal for Capital Gains purposes, but is instead deducted from the expenditure to be taken into account in arriving at the gain or loss on a subsequent disposal. These are listed below. Special rules apply for the purposes of the indexation allowances on the subsequent disposal.

Proceeds less than cost

Where there have been small receipts of this kind in connection with the asset disposed of, the amount of the indexation is reduced as follows.

  • Compute the indexation without regard to the small capital receipt.
  • Calculate the amount of indexation which would be given in respect of an amount of RAE which

    • is equal to the amount deducted from the expenditure and
    • was incurred on the date on which the event giving rise to the receipt occurred.
  • Deduct this amount of indexation from the indexation in respect of the expenditure from which the small receipt is deducted for the purposes of the computation of the unindexed gain.

The effect of this is to give indexation in respect of this part of the expenditure up to the date of the part-disposal only.

See example in CG17482.

Proceeds more than cost

The basis of computation is different if a disposal falls within TCGA92/S244, where the consideration for a small disposal EXCEEDS the allowable expenditure. See CG12820. Indexation in this situation is given in the part-disposal computation.

See example in CG17483.

See Example 12 in CG16960 where the asset was acquired before 31 March 1982.

Case included

These are the cases to which the above applies:-

  1. compensation for an asset not lost or destroyed. (TCGA92/S23 (1), see CG15700+);
  2. part-disposals of land to an authority with compulsory powers (TCGA92/S243, see CG72200);
  3. small part-disposals of land (TCGA92/S242, see CG71870+);
  4. small capital distributions (TCGA92/S122 (2) & TCGA92/S133 (2), see CG57835+ and CG55030;
  5. small part-disposals before 6 April 1965, see CG15590;
  6. small disposals in respect of insurance agencies, see CG69113.