CG17489 | Indexation: example: indexation and gifts hold-over relief
From HM Revenue & Customs · Capital Gains Manual
5 November 1982 A acquires an oil painting at arm’s length for cash £10,000.
5 July 1986 he gives the picture to B, his son. The market value of the picture at that time is agreed to be £15,000.
5 September 1988 B sells the picture at arm’s length for £20,000.
A’s computation is:-
| - | - | - | £ |
|---|---|---|---|
| - | Deemed proceeds (market value) | - | 15,000 |
| Less | Cost | - | 10,000 |
| - | Unindexed gain | - | 5,000 |
| Less | Indexation | 10,000 x 0.180 | 1,800 |
| - | INDEXED GAIN | - | 3,200 |
B claims gifts hold-over’ relief under the rules which were in force in 1986, see CG66730+, on his gain of £3,200.
B’s allowable expenditure is (£15,000 - £3,200) = £11,800 for all purposes. and the computation is therefore:
| - | - | - | £ |
|---|---|---|---|
| - | Disposal proceeds | - | 20,000 |
| Less | Cost (as reduced) | - | 11,800 |
| - | Unindexed gain | - | 8,200 |
| Less | Indexation | 11,800 x 0.112 | 1,322 |
| - | INDEXED GAIN | - | 6,878 |
The same principles apply to cases where the asset was a replacement asset used in a business, and roll-over relief was claimed.