Indexation: example: asset held at 31 March 1982
E Ltd purchased a ship in 1980 for £2,000,000.
The market value on 31 March 1982 was £1,600,000.
It was sold in March 1993 for £800,000.
The net capital allowances were £1,200,000.
Because the loss by reference to original cost is clearly larger than the loss under the rebasing rules, the `kink test’ does not substitute the actual loss for the loss based on the 31.3.82 value. See CG16732. Because the asset is plant and machinery, any election made under TCGA92/S35 (5) is disregarded, (TCGA92/SCH3/PARA7 (2)(a)).
|LESS||Market value 31.3.82||1,600,000|
|Deduct capital allowances||1,200,00||400,000|
|0.753 x 800,000|