CG17767 - 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 £90,000 Allowable costs of disposal were £4,000

COMPUTATION ON A

-	-	£
-	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
-	CHARGEABLE GAIN/ALLOWABLE LOSS	NIL

COMPUTATION ON SPOUSE

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

-	-	-	£
-	Disposal proceeds	-	90,000
Less	Cost (see note 2)	90,000	-
-	Costs of disposal	4,000	94,000
-	Unindexed loss	-	(4,000)
Less	Indexation (see note 3)	-	Nil
-	ALLOWABLE LOSS	-	(4,000)

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. This amount would be 90,000 x 0.707 = £63,630. To arrive at the allowable loss on the disposal in January 1994, this amount is added to the unindexed loss of £4,000, computed earlier, as follows:-

-	£
Unindexed loss	(4,000)
rolled-up indexation	(63,630)
ALLOWABLE LOSS	(67,630)*