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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Indexation: example: assets held at 31 March 1982

12 March 1979 X buys a field for £100,000.

31 March 1982 value is £85,000.

12 March 1989 X sells field for £80,000.

  Disposal proceeds   80,000
  Value 31.3.82   85,000
  Unindexed loss   (5,000)
LESS Indexation 100,000 x 0.414 40,400

It is clear that the kink test, using the greater original cost of £100,000, will give a greater loss than rebasing does. This is the most common instance after 31 March 1982 of indexation and cost being based on different figures apart from those no gain/no loss situations to which rebasing does not apply.