OT60090 | Transferable Tax History - Standardised Inflation Adjustment

Predicting future inflation is inherently uncertain. To avoid the risk of manipulation, which could allow a company to gain an advantage over other companies, a standardised adjustment for inflation should be allowed

The standardised inflation adjustment is calculated as follows:

1. Take the annual percentage increase in the output Producer’s Price Index (PPI), as published by the UK Office of National Statistics for each of the most recent three years ending 31 March, including the current year if a figure is available.

2. Take the sum of the annual percentage increases over those three years and divide by three.

3. Assume that this figure will be the rate of inflation for each year after the transaction, and apply to the net cost amount (after all other adjustments required as a consequence of para 9 have been applied) on a cumulative basis for each year until the expected date of the expenditure.