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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Indexation: disposals 30/11/93+: transitional relief: claims under S574

If the total of the amounts in CG17840 DOES exceed the overall £10,000 limit on the transitional relief, the taxpayer may allocate the £10,000 as they wish between the amounts of indexation loss which can be added to the ICTA88/S574 disposals, and the amount of indexation loss which can be deducted from chargeable gains in the year.

Example

F has ICTA88/S574 disposals in 1993-94 giving rise to allowable losses of £15,000. On the old indexation rules, see CG17800, the allowable losses would have been £22,000. So F’s 1993-94 indexation losses on these disposals are £7,000.

F has other disposals in 1993-94 giving rise to allowable losses of £14,000.

Indexation losses in respect of these disposals are £6,000.

F also has disposals in 1993-94 giving rise to gains of £30,000.

You first establish the amount of the reduction in 1993-94 chargeable gains which would (on its own) have been available in respect of indexation losses, as follows

    £
     
  Relevant gains  
  (gains £30,000 - losses £15,000) 15,000
less Exempt amount for the year 5,800
     
  Excess of relevant gains over exempt amount 9,200

The amount of the transitional relief would be the smallest of

  • the overall limit on the transitional relief, £10,000; or
  • the excess of relevant gains over the exempt amount for the year, £9,200; or
  • the amount of the indexation losses relating to the disposals included in the computation, £6,000.

The amount of the indexation losses relating to the disposals included in the computation is the smallest of these amounts. So the maximum amount by which F’s chargeable gains could be reduced would be £6,000.

You next add to this £6,000 the amount of indexation losses relating to the ICTA88/S574 disposals. This is £7,000; so the total indexation losses which could be used in 1993-94 would be £13,000. This exceeds the overall limit on the transitional relief, so the use of the indexation losses has to be restricted. F can claim a total of £10,000 indexation losses, and these can be allocated however the taxpayer wishes, up to the amounts of indexation loss which actually arose on the relevant disposals. So F could allocate up to £7,000 of the indexation losses to the ICTA88/S574 disposals, leaving £3,000 by which 1993-94 chargeable gains could be reduced. Alternatively, F could choose to reduce 1993-94 chargeable gains by up to £6,000, leaving £4,000 of indexation losses to be allocated to the ICTA88/S574 disposals to set against income.