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HMRC internal manual

Capital Gains Manual

Indexation: disposals 30/11/93+: rolled-up indexation to create loss

  • January 1981 A buys land for £80,000 (31 March 1982 market value = £90,000)
  • January 1992 A transfers the land at no gain/no loss to spouse
  • January 1994 spouse sells the land for £120,000 Allowable costs of disposal were £4,000


  Disposal proceeds (see note 1) 153,630
LESS Value at 31 March 1982 90,000
Unindexed loss 63,630  
LESS Indexation 90,000 x 0.707 63,630


WITHOUT THE AMENDMENTS TO TCGA92/S55, the computation on the spouse would have proceeded as follows:-

  Disposal proceeds 120,000  
LESS Cost (see note 2) 90,000  
  Costs of disposal 4,000 94,000
Unindexed gain 26,000    
LESS Indexation (see note 3) 26,000  

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: TCGA92/S55 (6)(b) removes indexation added to the transferee’s RAE on the no gain/no loss transfer.

Note 3: TCGA92/S55 (6)(a) requires indexation to be recomputed on the basis that the asset was held on 31 March 1982. This would be 90,000 x 0.779 = £70,110 but 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 THE AMENDMENTS TO TCGA92/S55 WILL APPLY. These require you to identify the amount of rolled-up indexation which would have been included in the transferee’s RAE under TCGA92/S56 (2) as a result of the no gain/no loss transfer in January 1992, were it not for the operation of TCGA92/S55 (6)(b). This amount would be 90,000 x 0.707 = £63,630. To arrive at the chargeable gain or allowable loss on the disposal in January 1994, this amount is deducted from the unindexed gain of £26,000, computed earlier, as follows:-

Unindexed gain 26,000  
LESS Rolled-up indexation 63,630