SolvedCG17876 | Indexation: disposals 30/11/93+: transitional relief: example
From HM Revenue & Customs · Capital Gains Manual
G has a ICTA88/S574 disposal in 1994-95 giving rise to an allowable loss of £90,000. The indexation loss in respect of the disposal is £20,000.
G had no disposals in 1993-94, and has no other disposals in 1994-95.
G’s income in 1993-94 is £35,000 and in 1994-95 is £40,000. Relief is claimed against income of both years under ICTA88/S574.
The ICTA88/S574 disposal is the only disposal on which the transitional relief can be given, so the whole of the £10,000 limit on the transitional relief is available on this disposal. So G’s allowable loss under the ICTA88/S574 claim is £90,000 + indexation loss (restricted to the limit of transitional relief) £10,000, = total £100,000.
The amount of the loss which can be set against G’s income in 1993-94 and 1994-95 is £35,000 + £40,000 = £75,000. The loss used against this income comprises
in respect of the amount of the loss, apart from the transitional relief,
| - | - | Amount |
|---|---|---|
| £75,000 x 90,000 | - | = £67,500 |
| - | 90,000 + 10,000 | - |
| - | in respect of the indexation loss | - |
| £75,000 x 10,000 | - | = £7,500 |
| - | 90,000 + 10,000 | - |
The amounts left after the set-off are
in respect of the amount of the loss, apart from the transitional relief,
£90,000 LESS £67,500 = £22,500
in respect of the indexation loss,
£10,000 LESS £7,500 = £2,500
The indexation loss is not available to carry forward beyond 1994-95. So the amount of the `surplus’ loss available for set-off against capital gains in 1995-96 or beyond will be the £22,500 only.