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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Indexation: example: sale and leaseback

X Ltd acquires in March 1987 a printing press costing £100,000.

It is disposed of in March 1993 under a sale and leaseback arrangement for £27,000.

The capital allowances, after deducting the balancing charge, amount to £73,000.

A sale and leaseback is treated as a part-disposal. See CG70774.

The value of the retained interest is £1,000.

            £
             
  Disposal proceeds         27,000
LESS Cost         100,000
  Allow 27,000 x 100,000 96,248  
    (27,000 + 1,000)        
  Deduct capital allowances       73,000 23,428
    Unindexed gain       3,572
LESS Indexation 23,428 x 0.385       9,020
    ALLOWABLE LOSS       5,448