CG17831 - Indexation: disposals 30/11/93+: use of transitional relief: example

This example continues from the example in CG17826. In 1994-95 D has disposals giving rise to allowable losses of £6,000. On the old indexation rules, the allowable losses would have been £8,000. So D’s 1994-95 indexation losses are £2,000. D also has £800 of unused indexation losses brought forward from 1993-94.

D has disposals in 1994-95 giving rise to gains of £15,000.

The transitional relief available to D for 1994-95 is computed as follows

-	-	£
-	Relevant gains 1994-95	-
-	(gains £15,000 - losses £6,000)	9,000
Less	Exempt amount for the year	5,800
-	Excess of relevant gains over exempt amount	3,200

The amount of the transitional relief is the smallest of

• the overall limit on the transitional relief, £10,000, LESS the amount used in 1993-94, £5,200, = £4,800; or
• the excess of relevant gains over the exempt amount for the year, £3,200; or
• the amount of indexation losses for 1994-95, £2,000, together with any unused indexation losses brought forward from 1993-94, £800, = £2,800.

The amount of indexation losses available is the smallest of the these amounts, so D’s chargeable gains for 1994-95 are reduced by this amount. The result is

-	-	£
-	Net chargeable gains	9,000
Less	Transitional relief	2,800
-	-	6,200
less	Exempt amount	5,800
-	1994-95 gains subject to CGT	400

The combined effect of the transitional rules in the above example can be summarised as follows.

-	1993-94	-	1994-95
-	£	-	£
Gains	20,000	-	15,000
Losses	9,000	-	6,000
Relevant gains	11,000	-	9,000
Exempt amount for the year	5,800	-	5,800
Excess of relevant gains over exempt amount	5,200	-	3,200
Indexation losses for the year	6,000	-	2,000
Indexation losses used	5,200	+ b/fwd 800	2,800
Gains subject to CGT	Nil	-	400
Indexation losses carried forward	800	-	-