CG17516 | Indexation: example: capital allowances exceed value on 31/3/82
From HM Revenue & Customs · Capital Gains Manual
F Ltd purchased a ship in 1975 for £2,000,000.
The market value on 31 March 1982 was £1,000,000.
It was sold in March 1993 for £500,000.
The net capital allowances were £1,500.000.
In this case the capital allowances exceed the market value on 31 March 1982. However the market value can only be reduced or eliminated. It cannot become negative expenditure.
| - | - | - | £ |
|---|---|---|---|
| - | Disposal proceeds | - | 500,000 |
| Less | Market value 31.3.82 | 1,000,000 | - |
| - | Deduct capital allowances (restricted) | 1,000,000 | NIL |
| - | Unindexed gain | - | 500,000 |
| Less | Indexation | - | - |
| - | Cost | 2,000,000 | - |
| - | Capital allowances | 1,500,000 | - |
| - | - | 0.753 x 500,000 | 376,500 |
| - | INDEXED GAIN | - | 123,500 |
As TCGA92/S41 cannot give rise to a gain, but only eliminate a loss, the loss is nil, and there is no gain.