CG17312 | Indexation: from 6/4/88 example: enhancement expenditure/disposal costs

From HM Revenue & Customs · Capital Gains Manual

COST

-	COSTS - £
On 1 May 1985, C Ltd buys a shop as business premises	50,000
On 1 May 1987 the back room is converted into a storeroom	17,000
On 1 May 1989 the shop is redecorated	5,000
On 1 June 1989 the shop is advertised for sale	1,000
On 1 October 1989 the shop is sold and C Ltd pays solicitor’s fees	2,400

Sale proceeds were £120,000.

The costs of repainting do not qualify, even though they may have been incurred specifically for the purposes of sale, because of TCGA92/S39, see CG14306.

The costs of sale and advertising fall within TCGA92/S38 (1)(c), and therefore do not qualify for indexation. See CG17240.

-	-	-	-	£
-	Disposal proceeds	-	-	120,000
less	Costs	-	50,000	-
-	-	-	17,000	-
-	-	-	1,000	-
-	-	-	2,400	70,400
-	Unindexed Gain	-	-	49,600
less	Indexation	50,000 at 0.234	11,700	-
-	17,000 at 0.153	2,601	14,301
-	Indexed Gain	-	-	35,299

The indexed gain may then require to be adjusted if for example C Ltd claims roll-over relief because the proceeds have been expended on other business assets.