CG17515 - 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)).

-	-	-	£
-	Disposal proceeds	-	800,000
Less	Market value 31.3.82	1,600,000	-
-	Deduct capital allowances	1,200,00	400,000
-	Unindexed gain	-	400,000
Less	Indexation	-	-
-	Cost	2,000,000	-
-	Capital allowances	1,200,000	602,400
-	-	0.753 x 800,000	-
-	INDEXED LOSS	-	(202,400)