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HMRC internal manual

Capital Gains Manual

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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