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HMRC internal manual

Capital Gains Manual

Indexation: disposals 4/85 to 3/88: claim for 31/3/82 value: indexation

FA85/S68 (4)

Where an asset which was held on 31 March 1982 is disposed of on or after the 1985 date, a claim may be made within two years of the end of the year of assessment in which the disposal occurred for the indexation allowance to be computed by reference to the market value of the asset on 31 March 1982 instead of by reference to the relevant allowable expenditure incurred up to that date. The computation of the unindexed gain or loss in accordance with CG17232 is unaffected by this provision.

Indexation is therefore computed by reference to notional relevant allowable expenditure (`RAE’), but exactly as if the taxpayer had acquired the asset on that date. So, for instance, if the asset is a lease, the expenditure falls to be wasted for indexation purposes as if the lease had been acquired on that date. If the asset is a freehold property, it is valued by reference to its condition on that date, for example, by taking account of any lease in force then, even though the land was sold after the lease had been terminated. See Henderson v Karmel’s Executors, 58TC201, a case on 6 April 1965 valuation.

Any relevant allowable expenditure incurred AFTER 31 March 1982 will qualify for indexation allowance in the normal way by reference to the date on which that expenditure was incurred.

FA85/S68 (5)

Election for 31/03/82 value: claims

A claim under FA85/S68(5) may be made informally, for example, by incorporation in a computation, provided that attention is drawn to it either in the computation itself or in a letter.


Assets with no cost

Where the disposal is of an asset held on 31 March 1982 which has no allowable expenditure under CG15161 (for example, copyright, goodwill or an interest in a partnership) a claim under FA85/S68 (5) may nevertheless be made for indexation allowance to be given by reference to the market value of the asset on that date. Market value is to be determined in each case in accordance with the normal principles set out in CG16200+.