SolvedCG17746 | Indexation: disposals 30/11/93+: previous no gain/loss transfer after 30/11/93
From HM Revenue & Customs · Capital Gains Manual
Example 1
January 1989 A buys land for £150,000
January 1994 A transfers the land at no gain/no loss to spouse
January 1995 spouse sells the land for £130,000 Allowable costs of disposal were £4,000.
COMPUTATION ON A
| - | - | £ |
|---|---|---|
| - | Disposal proceeds | 190,950 |
| Less | Cost | 150,00 |
| - | Unindexed gain | 40,950 |
| Less | Indexation January 1989 - January 1994 150,000 x 0.273 | 40,950 |
| - | ALLOWABLE LOSS | NIL |
COMPUTATION ON SPOUSE
WITHOUT NEW TCGA92/S56 (3), the computation on the spouse would have been:-
| - | - | - | £ |
|---|---|---|---|
| - | Disposal proceeds | - | 130,000 |
| Less | Cost (see note 1) | 190,950 | - |
| - | Costs of disposal | 4,000 | 194,950 |
| - | Unindexed loss | - | (24,950) |
| Less | Indexation (see note 2) | - | Nil |
| - | ALLOWABLE LOSS | - | (64,950) |
Note 1: On the no gain/no loss transfer, the asset is disposed of and acquired for such an amount as gives the transferor no gain/no loss, TCGA92/S56 (2).
Note 2: This indexation is subject to the general rule that for disposals on or after 30 November 1993 indexation does not create or increase a loss.
However, in these circumstances TCGA92/S56 (3) WILL APPLY. The amount of indexation included in the cost £190,950 was £40,950 (per computation on A). As the loss as computed is greater than £40,950, the loss is reduced by this amount, as follows:-
| - | - | £ |
|---|---|---|
| - | Loss as computed | 64,950 |
| Less | Indexation included in RAE | 40,950 |
| - | ALLOWABLE LOSS | (24,000) |
Example 2
January 1989 A buys land for £150,000
January 1994 A transfers the land at no gain/no loss to spouse
January 1995 spouse sells the land for £170,000 Allowable costs of disposal were £4,000
COMPUTATION ON A
| - | - | £ |
|---|---|---|
| - | Disposal proceeds (see note 1) | 190,950 |
| Less | Cost | 150,000 |
| - | Unindexed gain | 40,950 |
| Less | Indexation January 1989 - January 1994 150,000 x 0.273 | 40,950 |
| - | CHARGEABLE GAIN/ALLOWABLE LOSS | NIL |
COMPUTATION ON SPOUSE
WITHOUT NEW TCGA92/S56 (3), the computation on the spouse would have been:-
| - | - | - | £ |
|---|---|---|---|
| - | Disposal proceeds | - | 170,000 |
| Less | Cost (see note 1) | 190,950 | - |
| - | Costs of disposal | 4,000 | 194,950 |
| - | Unindexed loss | - | (24,950) |
| Less | Indexation (see note 2) | - | Nil |
| - | ALLOWABLE LOSS | - | (24,950) |
Note 1: On the no gain/no loss transfer, the asset is disposed of and acquired for such an amount as gives the transfer or no gain/no loss, TCGA92/S56 (2).
Note 2: This indexation is subject to the general rule that for disposals on or after 30 November 1993 indexation does not create or increase a loss.
However, in these circumstances TCGA92/S56 (3) WILL APPLY. The amount of indexation included in the cost £190,950 was £40,950 (per computation on A). As the loss as computed, £24,950, is less than this amount, the allowable loss is reduced to nil.