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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
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Groups: indexation on no gain/loss disposals: assets held on 31/3/82

Where a person making a disposal other than at no gain/no loss is deemed to have held an asset on 31 March 1982 for indexation purposes, the indexation allowance on the disposal is by reference to the RPI increase over the entire period from 31 March 1982 up to the date of that disposal. Indexation allowance accruing in the period up to the actual acquisition of the asset by the person making the disposal (that is, up to the most recent no gain/no loss disposal) will generally have been incorporated into the capital gains cost by TCGA92/S56 (2). The legislation achieves this by stripping indexation out of the capital gains cost in relation to no gain/no loss disposals after 31 March 1982. See TCGA92/S55 (6)(b).

EXAMPLECompany A holds an asset on 31 March 1982. In December 1986 A disposes of the asset at no gain/no loss to B. In June 1990 B disposes of the asset to an unconnected third party. Indexation accrued to December 1986 is incorporated in the cost to B under the general rule that the notional consideration which establishes the no gain/no loss result for A takes account of A’s indexation entitlement. But B, if treated as having held the asset on 31 March 1982, is entitled to indexation throughout the period from March 1982 to June 1990. To prevent the duplication of indexation for the period from March 1982 to December 1986, the indexation component is stripped out of the cost at which B acquires the asset from A.