Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
, see all updates

Indexation: disposals 30/11/93+: previous no gain/loss transfer after 30/11/93

Example 1

  • January 1989 A buys land for £150,000
  • January 1994 A transfers the land at no gain/no loss to spouse
  • January 1995 spouse sells the land for £130,000 Allowable costs of disposal were £4,000.

COMPUTATION ON A

  £  
     
  Disposal proceeds 190,950
LESS Cost 150,00
Unindexed gain 40,950  
LESS Indexation January 1989 - January 1994 150,000 x 0.273 40,950
ALLOWABLE LOSS NIL  

COMPUTATION ON SPOUSE

WITHOUT NEW TCGA92/S56 (3), the computation on the spouse would have been:-

  £    
       
  Disposal proceeds 130,000  
LESS Cost (see note 1) 190,950  
  Costs of disposal 4,000 194,950
Unindexed loss (24,950)    
LESS Indexation (see note 2) Nil  
ALLOWABLE LOSS (64,950)    

Note 1: On the no gain/no loss transfer, the asset is disposed of and acquired for such an amount as gives the transferor no gain/no loss, TCGA92/S56 (2).

Note 2: This indexation is subject to the general rule that for disposals on or after 30 November 1993 indexation does not create or increase a loss.

However, in these circumstances TCGA92/S56 (3) WILL APPLY. The amount of indexation included in the cost £190,950 was £40,950 (per computation on A). As the loss as computed is greater than £40,950, the loss is reduced by this amount, as follows:-

    £
     
  Loss as computed 64,950
LESS Indexation included in RAE 40,950
    -–-–
  ALLOWABLE LOSS (24,000)
    -–-—

Example 2

  • January 1989 A buys land for £150,000
  • January 1994 A transfers the land at no gain/no loss to spouse
  • January 1995 spouse sells the land for £170,000 Allowable costs of disposal were £4,000

COMPUTATION ON A

  £  
     
  Disposal proceeds (see note 1) 190,950
LESS Cost 150,000
Unindexed gain 40,950  
LESS Indexation January 1989 - January 1994 150,000 x 0.273 40,950
CHARGEABLE GAIN/ALLOWABLE LOSS NIL  

COMPUTATION ON SPOUSE

WITHOUT NEW TCGA92/S56 (3), the computation on the spouse would have been:-

  £      
         
  Disposal proceeds 170,000    
LESS Cost (see note 1) 190,950    
  Costs of disposal   4,000 194,950
Unindexed loss (24,950)      
LESS Indexation (see note 2) Nil    
ALLOWABLE LOSS (24,950)      
         

Note 1: On the no gain/no loss transfer, the asset is disposed of and acquired for such an amount as gives the transfer or no gain/no loss, TCGA92/S56 (2).

Note 2: This indexation is subject to the general rule that for disposals on or after 30 November 1993 indexation does not create or increase a loss.

However, in these circumstances TCGA92/S56 (3) WILL APPLY. The amount of indexation included in the cost £190,950 was £40,950 (per computation on A). As the loss as computed, £24,950, is less than this amount, the allowable loss is reduced to nil.