SolvedCG17310 | Indexation: from 6/4/88 example: basic computation
From HM Revenue & Customs · Capital Gains Manual
On 1 May 1988 Mr A buys three paintings for £20,000 each.
On 1 June 1992 he sells them.
The first is sold for £100,000 giving an unindexed gain
The second is sold for £15,000 giving an unindexed loss
The third is sold for £24,000 giving an unindexed gain
The tables, see CG17290, show that for a disposal in June 1992 of an asset acquired in May 1988, the indexation factor is 0.312, giving indexation of £6,240.
The computations are as follows:
| - | FIRST | SECOND | THIRD |
|---|---|---|---|
| Disposal Proceeds | 100,000 | 15,000 | 24,000 |
| Cost | 20,000 | 20,000 | 20,000 |
| Unindexed Gain | 80,000 | Loss (5,000) | Gain 4,000 |
| less Indexation | 6,240 | 6,240 | 6,240 |
| Indexed Gain | 73,760 | Loss (11,240) | Loss (2,240) |
This shows that before 30 November 1993, indexation could
reduce a gain as with the first picture,
increase a loss as with the second, and
turn an unindexed gain into an indexed loss as with the third.
The effect of the changes applying with effect from 30 November 1993, see CG17700+, assuming a disposal on or after that date, would be that
the loss on the second would equal the unindexed loss, and
the unindexed gain on the third would be eliminated by indexation, but there would be no indexed loss.