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HMRC internal manual

Capital Gains Manual

HM Revenue & Customs
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Groups: indexation allowance restriction: debts on a security

Indexation allowance is eliminated completely by TCGA92/S182 (1) on the disposal of a debt on a security if the creditor company and the debtor company were linked companies both

  • immediately after the creditor company acquired the debt (by making a loan or by acquiring an existing debt), and
  • immediately before the creditor company disposed of the debt.

These tests refer to the time immediately after the acquisition of the debt and the time immediately before the disposal of the debt since it is possible that the loan may itself make the companies linked. This may happen where the loan establishes control and as a result the companies become associated.