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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Indexation: example: chattel exemption and capital allowances

X Ltd buys a van in March 1989 for £6,800.

It sells it in March 1993 for £5,000.

Net capital allowances are £1,800.

Disregarding TCGA92/S41 the computation would be

      £
       
  Disposal proceeds (deemed) - TCGA92/S262 (3)   6,000
LESS Cost   6,800
  Unindexed loss   800
LESS Indexation 6,800 x 0.240 1,632
  ALLOWABLE LOSS   (2,432)

Applying TCGA92/S41 gives the following result:

      £
       
  Disposal proceeds (deemed)   6,000
LESS Cost 6,800  
  Deduct capital allowances 1,800 5,000
  Unindexed Gain   1,000
LESS Indexation 5,000 X 0.240 1,200
  ALLOWABLE LOSS   (200)