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HMRC internal manual

Capital Gains Manual

Indexation allowance

Indexation allowance enables a deduction to be made in the CG computation to account for the effects of inflation. Guidance on the calculation of indexation allowance is given at CG17200+.

For Capital Gains Tax purposes indexation allowance was frozen at 5 April 1998 in respect of disposals on or after 6 April 1998 and ceased to be available altogether for disposals on or after 6 April 2008.

Indexation allowance is still available to corporate partners, see CG27100, who are chargeable to Corporation Tax on chargeable gains.

SP1/89 explains HMRC’s practice in relation to the calculation of indexation allowance where neither a gain nor a loss arises to a partner whose interest in a partnership asset is reduced on a change in fractional sharing ratios, see CG27500. Guidance on the effect of SP1/89 is given at CG28330.