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|
|1994-95 gains subject to CGT||400|
The combined effect of the transitional rules in the above example can be summarised as follows.
|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|