CG17746 - 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.