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HMRC internal manual

Capital Gains Manual

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Indexation: disposals 4/82 to 3/85: commencement date for indexation

The ‘operative date’ referred to in the following guidance is 1 April 1982 for companies and 6 April 1982 for other taxpayers. An indexation allowance might be due where a disposal, including a part-disposal, of an asset occurred on or after the ‘operative date’, but not in all cases.

This part of the guidance concerns the provisions for disposals on or after the `operative date’ but before the `1985 date’, see CG17570.

Main differences from 1988 provisions

Particular features to note in relation to the indexation allowance for this period are as follows-

i) No indexation allowance was given where, apart from that allowance, there would be an allowable loss, nor could the indexation allowance create a loss.

 

ii) No allowance was due unless the asset had been owned by the taxpayer disposing of it for at least twelve months (even if it had been acquired prior to the `operative date’) except in certain no loss, no gain cases. RI was the factor for the month 12 months after the expenditure was incurred, or for March 1982, whichever was the later.

 

iii) No indexation allowance was available unless the disposal occurred on or after the `operative date’.

 

iv) The allowance was available, subject to (ii) above, regardless of when the asset was acquired but the method of calculation ensured that no adjustment was made for inflation prior to the `operative date’.

 

v) The allowance was always calculated by reference to the cost figure in the computation. The market value on 31 March 1982 was of no relevance.

FA82/S86 (1) (c) & FA82/S86 (5)

No loss rule

Indexation could only apply if the computation before indexation gave an unindexed gain. Therefore the general rule of TCGA92/S16 (1), that losses are computed in the same way as gains, was disregarded to this extent.

If there was an unindexed gain, but indexation exceeded this amount, then there was neither loss nor gain.

FA82/S86 (2) (a)

Original wording

The original wording of FA82/S86 (2)(a) referred to the `gross gain’ rather the `unindexed gain or loss’. This change merely reflects the inclusion of losses from 1985. This is explained by the speech of Lord Jauncey in Smith v Schofield.