CG17831 | Indexation: disposals 30/11/93+: use of transitional relief: example

This example continues from the example in CG17826. In 1994-95 D has disposals giving rise to allowable losses of £6,000. On the old indexation rules, the allowable losses would have been £8,000. So D’s 1994-95 indexation losses are £2,000. D also has £800 of unused indexation losses brought forward from 1993-94.

D has disposals in 1994-95 giving rise to gains of £15,000.

The transitional relief available to D for 1994-95 is computed as follows

The amount of the transitional relief is the smallest of

• the overall limit on the transitional relief, £10,000, LESS the amount used in 1993-94, £5,200, = £4,800; or

• the excess of relevant gains over the exempt amount for the year, £3,200; or

• the amount of indexation losses for 1994-95, £2,000, together with any unused indexation losses brought forward from 1993-94, £800, = £2,800.

The amount of indexation losses available is the smallest of the these amounts, so D’s chargeable gains for 1994-95 are reduced by this amount. The result is

The combined effect of the transitional rules in the above example can be summarised as follows.