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HMRC internal manual

Capital Gains Manual

Indexation: disposals 30/11/93+: transitional relief: S161(3) claims

TCGA92/S161 (3)

Under ICTA88/S161 (1), where a person appropriates an asset as trading stock for the purposes of a trade, there is a deemed disposal for capital gains purposes at market value at the date of appropriation, see CG69200+. But, under TCGA92/S161, if the income from the trade is taxable under Schedule D Case I, the person may elect to have the market value of the asset reduced by the deemed gain, or increased by the deemed loss, see CG69200. The changes to indexation allowance introduced by Finance Act 1994 would remove indexation from any losses arising on the appropriation, see CG17700+.

S161(3) claims

The transitional relief for indexation losses can apply to these losses also. You should compute the indexation loss as before, see CG17800. The relief is given in exactly the same way as described for the calculation of increases to allowable losses arising on ICTA88/S574 disposals, see CG17840+.

Both S161(3) and S574 claims

If claims are made under both TCGA92/S161 (3) and ICTA88/S574, you apply the rules at CG17840+ by aggregating the amounts of the indexation losses attributable to the relevant appropriations under TCGA92/S161, and the ICTA88/S574 disposals.

Where the £10,000 limit on transitional relief is exceeded, see CG17850 and CG17855+, the allocation of indexation losses may be made between any of the categories, up to the amount of indexation losses on each.