CG69118 - 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

Year	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 £1,500

Year 2 Payments exceed receipts Add net payments to balance of expenditure £160

Total £1,660

Year 3 Net receipts £60 are less than 5% of £1,660 ‘small disposal: £60
deduct from balance

Total £1,600

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 agent)

Net disposal consideration £300
Less £1,600 x £300 £200 £200

£300 + £2,100

Chargeable gain £100

Allowable expenditure carried forward £1,400