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HMRC internal manual

Capital Gains Manual

Dwellings subject to ATED: computation of gains and losses: chargeable interests acquired after 5 April of the relevant year - examples

1.Acquisition in April 2014 for £4,000,000

2.Acquisition in October 2015 for £1,500,000

 

 

1.Acquisition in April 2014 for £4,000,000

 

Basic information:

Residential property acquired April 2014 for £4,000,000 and disposed of April 2020 for £6,000,000.

Estimated Indexation factor: April 2014 to April 2020 0.25
     
Total number of days chargeable to ATED 730  
Total days April 2014 to April 2020 2,190  

 

Stage 1

 

Disposal proceeds £6,000,000
   
Allowable deductions for CGT purposes £4,000,000
Gain on CGT rules £2,000,000

 

Stage 2

 

Days in period of ownership that are chargeable to ATED (CD) 730
   
   
Total days (TD) 2,190
   
CD/TD x gain on CGT rules ((730/2,190) x £2,000,000) = £666,667
   
ATED-related chargeable gain £666,667

 

Stage 3

 

Not required - gain under stage 2

 

Stage 4

Unadjusted gain from stage 1 above   £2,000,000
     
Less    
ATED related gain £666,667  
Notional indexation (see below) £666,667 £1,333,334
    £666,666
Non ATED-related gain   £666,666
     

 

Notional indexation:

 

Maximum indexation (£4,000,000 x 0.25) = £1,000,000

Relevant fraction: ((TD - CD) / TD) x indexation

((2190 - 730) / 2190) x £1,000,000) = £666,667

 

2.Acquisition in October 2015 for £1,500,000

 

Basic information:

Residential property acquired October 2015 for £1,500,000 and disposed of April 2020 for £2,500,000.

Estimated Indexation factor: October 2015 to April 2020 0.20
     
Total number of days chargeable to ATED 730  
Total days October 2015 to April 2020 1,643  

 

Stage 1

Disposal proceeds £2,500,000
   
Allowable deductions for CGT purposes £1,500,000
Gain on CGT rules £1,000,000

 

Stage 2

Days in period of ownership that are chargeable to ATED (CD) 730  
     
     
Total days (TD) 1,643  
     
CD/TD x gain on CGT rules ((730/1,643) x £1,000,000) = £444,309  
     
ATED-related chargeable gain £444,309  
     

 

Stage 3

Not required – gain under stage 2

 

Stage 4

Unadjusted gain from stage 1 above   £1,000,000
     
Less    
ATED related gain £444,309  
Notional indexation (see below) £166,708 £611,017
    £388,983
Non ATED-related gain   £388,983
     

 

Notional indexation:

Maximum indexation (£1,500,000 x 0.20) = £300,000

Relevant fraction: ((TD – CD) / TD) x indexation

((1643 – 730) / 1643) x £300,000) =   £166,708