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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Indexation: disposals 4/82 to 3/85: no gain/loss cases: 12 month rule

FA82/SCH13/PARA3 (3)

Special rules applied where an asset was acquired-

  1. from the spouse of the person disposing of the asset and TCGA92/S58, see CG22200+ applied; or
  2. from a company within the same group as the company acquiring the asset and either TCGA92/S139 or TCGA92/171, applied to the transfer, see CG52800+ and CG45300+; or
  3. after 5 April 1983 and consisted of land, from an existing constituency association by a successor association and TCGA92/S264, applied.
  4. within FA82/S148 from the Hops Marketing Board (now repealed 2004).

The special rules were limited to these four categories of no gain, no loss transfers because with no others can the asset be regarded to the same extent as remaining in the same ownership.

FA82/SCH13/PARA3 (4) & (5)

In a case within the above categories, where the transferor had incurred any item of allowable expenditure on the asset 12 months or more prior to the transfer, the transferee would be entitled to indexation allowance in respect of that expenditure from the month in which the date of the transfer fell, that is, it did not have to wait another 12 months before its indexation allowance commenced. If the transferor had incurred any item of allowable expenditure on the asset less than 12 months before the transfer, the transferee would be entitled to indexation allowance only from the twelfth month after the expenditure was incurred.

FA82/SCH13/PARA3 (6)

Where there had been a continuous chain of transactions under sub-heads (a) or (b) above, it was permissible to look through the chain to determine the date on which any item of expenditure on the asset was incurred and for which month the indexation allowance to the transferee commences.

12 month rule

For example, A Ltd, B Ltd and C Ltd are members of the same group of companies at the relevant times.

A Ltd buys an asset from outside the group for £10,000, in August 1982, and transfers it to B Ltd under the provisions of ICTA70/S273, in December 1982.

B Ltd transfers it to C Ltd in February 1983, again under TCGA92/S273. C Ltd sells the asset for £15,000 to an outsider in April 1983.

The chargeable gain to C Ltd is £5,000 and no indexation allowance is available because looking through the chain of companies, the asset was not acquired by A Ltd more than 12 months before its sale by C Ltd.

If, however, A Ltd had bought the asset in August 1981, indexation allowance would be available to A Ltd from August 1982 to December 1982 to B Ltd from December 1982 to February 1983 and to C Ltd from February 1983 to April 1983.

For the purposes of indexation the rules above took precedence over any provision in the Capital Gains legislation which provided for a no gain, no loss disposal and required that the date of acquisition by a transferee of an asset should be deemed to be the date upon which the transferor acquired it.