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HMRC internal manual

Capital Gains Manual

Indexation: from 6/4/88: assets held at 31/3/82

TCGA92/S55 (1)

Under TCGA92/S55 (1), for the purposes of computing the indexation allowance on an asset held at 31 March 1982 and disposed of AFTER 5 APRIL 1988, it shall be assumed that the asset had been sold and reacquired at market value on 31 March 1982. Therefore in general the indexation is based on that value.

TCGA92/S55 (2)

However if

  • the amount of indexation would be GREATER if that provision did not apply and
  • the taxpayer has not made an election under TCGA92/S35 (5) to exclude the `kink test’, see CG16760+,

then indexation is based on the actual cost, or market value at the date of acquisition or 6 April 1965, as appropriate.

See example in CG17491.

The principles for dealing with assets held on 31 March 1982 are dealt with in more detail in the chapter starting at CG16700.

Held-over gains etc

If however indexation is based on the market value at 31 March 1982 the fact that hold-over or roll-over relief was claimed in respect of the acquisition is irrelevant. This is because the taxpayer is deemed to have sold and reacquired the asset at market value on that date. The deduction of the held-over gain affects the original cost only. It may therefore be advantageous for indexation purposes to choose the value at 31 March 1982 even if it is lower than the original market value BEFORE deducting the held-over gain. See example in CG17601.