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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Indexation: example: part-disposal

1 June 1982 Y acquires office premises for £100,000.

1 June 1985 premises improved by spending £25,000 on car parking and an entrance.

1 June 1988 part of premises sold for £45,000, the part retained is worth £180,000.

1 June 1990 rest of premises sold for £160,000.

FIRST DISPOSAL

The part-disposal formula, see CG12731, gives

 4 5 , 0 0 0 
 
(180,000 + 45,000)

This is 1/5

      £
       
  Disposal proceeds   45,000
LESS Proportion of cost 1/5 of 100,000 20,000  
    1/5 of 25,000 5,000 25,000
  Unindexed gain   20,000
LESS Indexation 20,000 at 0.302 6,040  
    5,000 at 0.117 585  
  INDEXED GAIN   13,375
The residual expenditure   80,000 on 1 June 1982  
    20,000 on 1 June 1985  

SECOND DISPOSAL

        £
         
  Disposal proceeds     160,000
LESS Cost (residual expenditure)   80,000  
      20,000 100,000
  Unindexed gain     60,000
LESS Indexation 80,000 at 0.548 43,840  
    20,000 at 0.328 6,560 50,400
  INDEXED GAIN     9,600