CG16882 | Rebasing to 31/3/82: no gain/loss disposals: examples

Example 1
Example 2

Example 1

A Ltd acquired an asset in 1979.

In 1983 A Ltd transferred it to B Ltd, a subsidiary of A Ltd, under ICTA70/S273 (now TCGA92/S171).

In 1985, B Ltd’s business was transferred to C Ltd in the course of a scheme of reconstruction, and the asset passed to C Ltd under ICTA70/S267 (now TCGA92/S139).

C Ltd sold the asset in July 2012.

As both ICTA70/S267 and ICTA70/S273 are specified in TCGA92/SCH3/PARA1, and as there were no other disposals of the asset between 31 March 1982 and July 2012, C Ltd is treated as having held the asset on 31 March 1982 for the purposes of rebasing (and indexation if beneficial).

Example 2

REBASED GAIN

The enhancement expenditure incurred by A as the actual owner of the asset is treated as incurred by B where, for indexation or rebasing purposes, B is deemed to have held the asset on 31 March 1982. The rebasing calculation by reference to 31 March 1982 market value is accordingly:

GAIN ON OLD RULES

Where a ‘kink test’ is required in the case of a disposal by a company then, for the purposes of the comparison by reference to historic cost, B takes over A’s actual cost (£10,000 plus enhancement expenditure £3,000). The indexation included in B’s allowable cost on the no gain/no loss disposal by Section 56(2) TCGA 1992 is stripped out by Section 55(6)(b), and for indexation purposes B is treated as having held the asset on 31 March 1982. The calculation by reference to historic cost is accordingly:

Note: Indexation is based on the higher of relevant allowable expenditure before 31 March 1982 and the 31 March 1982 value, see CG16732.

The chargeable gain is £4,247 (the smaller gain).