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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Insurance agents: example

This example illustrates how the agreed procedure worked before the introduction of indexation allowance and rebasing. Accumulated allowable expenditure at end of year 1 is £1,500

  Payments Receipts Difference
       
In year 2 335 175 160
In year 3 80 140 -60
In year 4 100 400 -300
      £ £
         
  Allowable expenditure brought forward from year 1 1500    
Year 2 Payments exceed receipts Add net payments to balance of expenditure 160    
        1660
Year 3 Net receipts £60 are less than 5% of £1,660 ‘small’ disposal:      
deduct from balance of expenditure 60        
          1600
  Year 4 Net receipts £300 exceed 5% of £1,600 ‘large’ disposal:      
part-disposal computation needed Value of ‘book’ at end of year 4 is agreed at £2,100 (this reflects new business obtained by the agent)          
    Net disposal consideration   300  
    less 1,600 x 300 200 200
      300 + 2,100    
    Chargeable gain   100  
    Allowable expenditure carried forward   1400