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

From HM Revenue & Customs · Capital Gains Manual

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

--£
-Relevant gains 1994-95-
-(gains £15,000 - losses £6,000)9,000
LessExempt amount for the year5,800
-Excess of relevant gains over exempt amount3,200

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

--£
-Net chargeable gains9,000
LessTransitional relief2,800
--6,200
lessExempt amount5,800
-1994-95 gains subject to CGT400

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

-1993-94-1994-95
-£-£
Gains20,000-15,000
Losses9,000-6,000
Relevant gains11,000-9,000
Exempt amount for the year5,800-5,800
Excess of relevant gains over exempt amount5,200-3,200
Indexation losses for the year6,000-2,000
Indexation losses used5,200+ b/fwd 8002,800
Gains subject to CGTNil-400
Indexation losses carried forward800--