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:

The same principles apply to cases where the asset was a replacement asset used in a business, and roll-over relief was claimed.