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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Dwellings subject to ATED: computation of gains and losses: chargeable interests held on 5 April 2013: para 5 election applies - example

Basic information:

Residential property acquired April 2006 for £3,000,000 and disposed of April 2016 for £6,000,000.

Estimated Indexation factor: April 2006 to April 2016 0.4  
       
Total number of actual chargeable days and pre April 2013 ATED days 1,825    
Total days to disposal 3,650    
       

Stage 1

Disposal proceeds £6,000,000
   
Allowable deductions for CGT purposes £3,000,000
Gain £3,000,000

Stage 2

Actual and pre April 2013 ATED days (CD) 1,825
   
   
Total days (TD) 3,650
   
CD/TD x stage 1 gain ((1,825/3,650)) x £3,000,000) = £1,500,000
   
ATED related chargeable gain £1,500,000

Stage 3

Unadjusted gain from stage 1   £3,000,000
     
ATED related gain £1,500,000  
Notional indexation (see below) £600,000 £2,100,000
Non ATED related gain   £900,000

Notional indexation:

Indexation due on disposal

3,000,000 x 0.4 = £1,200,000

Apply factor (CD-TD)/TD  
   
(3,650 - 1,825)/(3,650) x £1,200,000  
Notional Indexation is £600,000